I’ve noticed an interesting thing lately. One of the services I provide is legal opinion letters to remove the restrictive legend from private stock (also known as a Rule 144 opinion letter). And once I write one letter for an employee to be able to sell their shares, that employee will often refer me to a bunch of other employees at the same company.
Some explanation is in order. In short, the SEC wants to make sure that people buying stock on the public markets can benefit from enough information about the companies they invest in; so if you invest in a private offering (or if you are given a private company’s stock, such as if you are an early employee at a startup), you typically can’t sell the stock to the public for some period—often six months or a year. Unfortunately, transfer companies require holders of restricted stock to get a letter from an attorney explaining why that stock should no longer be restricted.
If the company is considerate, it will pay to have a “blanket opinion” done that can cover large numbers of their shareholders; but most companies do not, so the shareholders have to go find a lawyer and pay for their own letters. (All part of the Full Employment for Lawyers Act of 1933™, as I call it.)
Now, I write a bunch of Rule 144 letters in my practice (and I do blanket opinions too). I work quickly and I do revisions if the transfer agent has some sort of issue with the way my typical letter is worded. Apparently, this is not the universal practice; and a lot of people are desperate to find an attorney who can take care of their problems without breaking the bank. When I do searches to see what other attorneys charge, I’m astounded to see some lawyers charge $600 or more for a standard letter. I can understand those prices if it’s an unusual case needing more research, but for a basic letter? For that price, it had better come in gold-embossed vellum in a frame…
There appears to be a lot of pent-up demand for quick turnaround at a reasonable price. How many people do you know with restricted stock that they don’t know how to sell?
Oren Litwin LLC 