Promotional Stock Definition and Legal Meaning
On this page, you'll find the legal definition and meaning of Promotional Stock, written in plain English, along with examples of how it is used.
What is Promotional Stock?
a share in the stock of a newly formed corporation given to the prmoter for his efforts in setting up the organisation,raising capital by obtaining stock subsriptions or other sorts of finance.Promational stock is limited by most states as support is in the form of effort and not cash or assets.
History and Meaning of Promotional Stock
Promotional stock refers to the shares of a new company that are awarded to promoters as compensation for their contributions to the formation of the company. These contributions may include fundraising efforts, securing investments, and other promotional activities. In most states, the issuance of promotional stock is subject to limitations as the support provided is through the promoter's efforts and not cash or assets.
The issuance of promotional stock was a common practice during the early years of the American stock market. The popularity of this practice waned in the late 19th and early 20th centuries due to concerns over fraud and abuse. Nowadays, many states have regulations that limit the amount of promotional stock that can be issued and require that the stock be registered with the applicable regulatory agency.
Examples of Promotional Stock
- A group of investors formed a new startup and enlisted the help of a promoter to secure additional funding. As compensation for his efforts, the promoter was awarded a portion of promotional stock in the new company.
- A real estate developer decided to form a new joint venture to build a large commercial property. They awarded promotional stock to the lead investor as compensation.
- A new fintech company hired a promotional consultant to help raise awareness about its new platform. As part of the compensation, the consultant was given a certain amount of promotional stock.
Legal Terms Similar to Promotional Stock
- Stock Option - A contractual right given to an individual to purchase a specific number of shares of a company's stock at a set price within a specified time frame.
- Restricted Stock - Shares issued to an individual that cannot be sold until certain conditions are met.
- Stock Grants - Awards of shares given to executives, employees, or directors as compensation.