Trending Assets
Top investors this month
Trending Assets
Top investors this month
Question to the CommonStock community, what's your view on Nasdaq rule 5635(c)(4)?
The Nasdaq stock market has a rule called 5635(c)(4). This rule is about giving stock to important new employees at a company. Normally, when a company wants to give a lot of its stock to someone, it has to ask its shareholders to vote on it first. But rule 5635(c)(4) says some big stock gifts don't need a shareholder vote.

These are called "employment inducement awards." It's when a company gives stock to a new worker it really wants to hire. For example, if a company gets a new CEO or other top executive, it might offer them a bunch of stock options to convince them to take the job. Or if someone hasn't worked at that company before, it can give them stock without a shareholder vote.

So in short, rule 5635(c)(4) lets companies give big stock gifts to attract important new hires without asking shareholders first. The company's board decides these awards, since they help "induce" desired people to join or rejoin the company.

Image upload
Some view it as a bullish signal for these reasons:

  • The ruling means the company just hired someone super talented like a new CEO. The company must think this person can do amazing things to grow the business.
  • To convince this amazing new hire to join, the company had to offer a ginormous stock gift. This suggests the company expects to do so well under this person that the stock will be worth much more in the future.
  • The new hire only makes big money if the stock goes up. So they'll work really hard to make the company more successful and valuable. Their interests are tied to the stock price rising.
  • It shows the company has big plans for expansion and growth. Otherwise, why splurge on giving away so much stock? They must be really optimistic.

In summary, when investors see a company use the 5635(c)(4) rule to hire someone incredible, they usually get excited. It signals that huge growth could be coming in the future if this new person helps the company boom! That's why it's often a bullish sign.

With that, can you tell me what your view is on the Nasdaq ruling and whether it points to a buy signal for stocks? Let me know in the comments below!

Related
Already have an account?