Comments In Advance To Rule Making On Elimination On Advertising And Solicitation Ban For Certain Private Offerings
Summary of Title II
Title II of the JOBS Act provides that, within 90 days of the passage of the JOBS Act (i.e. July 5, 2012), the SEC will amend Section 4(2) of the Securities Act of 1933 and Regulation D promulgated there under, to eliminate the prohibition on general solicitation and general advertising in a Rule 506 offering, so long as all purchasers in such offering are accredited investors. The JOBS Act directs the SEC to make the same amendment to Rule 144A so long as all purchasers in the Rule 144A offering are qualified institutional buyers. Neither a Rule 506 offering nor a Rule 144A offering will be considered a public offering (i.e. will lose its exemption) by virtue of a general solicitation or general advertising so long as the issuer has taken reasonable steps to verify that purchasers are either accredited investors or qualified institutional buyers, respectively. Since it would be impossible to ensure that only accredited
Last week I wrote a blog introducing, at least to me, Private Company Market Places (PCMP). A PCMP is a trading platform, such as SharePost or SecondMarket that provides a market place for illiquid restricted securities, such as private company securities, 144 stock, debt instruments, warrants, and the like or alternative assets. It is on a PCMP that Facebook’s shares currently trade and where pre-IPO Groupon and LInkedin received their trading start.
This week I reviewed some of the top PCMP players, including Gate Technologies, SecondMarket, Sharespost and Xpert Financial. I have no affiliation, have never worked with and maintain no accounts with any of these PCMPs.
PCMP’s are Broker Dealers or Affiliated
Each PCMP is a licensed broker dealer or affiliated with a licensed broker dealer, that has either created or licensed an electronic trading board, available at their respective websites, which allows investors to view, buy, and sell otherwise illiquid, restricted or alternative assets. These securities are
As I discussed in a recent blog, the attraction of the small cap and reverse merger market has diminished greatly in the past two years. The Over the Counter market has become an expensive place to conduct business; the antithesis of the very reason small companies sought to list there to begin with. Accessing capital markets for microcap companies is not as simple as it once was.
In addition to the added expensive of complying with the Securities Exchange Act of 1934 disclosure requirements, the marketplace invites speculators who short sell (bet that the price of a stock will go down) and hedge with derivatives, often creating unpredictable volatility and share prices not indicative of the underlying value of the actual business.
No Automatic Liquidity for Issuers
Being public is no guarantee of liquidity either. It’s fantastic for an issuer to state that their stock is being quoted at $5.00 per share, but if there is no volume (the shares