The company I used to work for, Neustar (NYSE: NSR) went public last
week. I have a few hundred shares of the stock, but as part of the IPO
process, they converted all outstanding shares to Class B shares. Only
Class A shares can be traded on the public market. The company's bank
is supposed to be converting the Class B shares to Class A shares, but
they are also taking their sweet time about it. I did not sign the
lock-up agreement for my shares, and I am no longer an employee and
hardly an insider, since I was just a grunt programmer. Current
employees below director level are locked-up for 90 days. So, finally,
my question is, while I am waiting for my Class A shares, can I sell
shares of the stock short in order to hedge myself and lock in any
profits? Or will I end up in jail like Martha for this sort of
activity?

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Clarification of Question by sexygrandma-ga on 06 Jul 2005 10:02 PDT

Also, once I do get the Class A shares, can I then sell them whenever I want?

well, yes and no. generally there is no provision against shorting a
stock eligible to be shorted with the intention of making delivery at
a later time via conversion rights associated with another security.
so, yes, in theory and in usual practice, if i own B and can convert
it to A, i can short A, convert B and deliver to close the position.
in the meantime you are subject to the usual and customary short
position rules as you are not technically short against the box. you
know you are but the brokerage firm can't see it so they will treat it
as a straight short position.

your problem is the eligibility section. ipo shares are not marginable
and hence not eligible to short for 30 days from the public offering
date. it appears you are still inside that window, so, no. well, not
yet anyway.

as you signed no agreement not to sell i don't see that as an
impediment to sale. how you came to this stock may inspire some 144
questions but i can't tell that from your question.

the other issue is while your B shares are convertible to A shares, it
is at the holders request. unless they told you they are doing it for
you anyway or unless you have filed such a request, i would look into
how to file said request or you could be waiting a long time
approaching forever. neustar acknowledges that eventually there will
be no B shares. all B holders will convert and the B classification
will be done away with.