Monday, May 16, 2016
Title III Crowdfunding is LIVE!
OK. I count 17 Form C filings (not including a few amended filings, two of which are noted below) on "Day 1" of U.S securities crowdfunding. Not a bad showing for the first day out, in my view.
First in line? Bloomery Investment Holdings, LLC with an offering of LLC interests on StartEngine Capital LLC. The firm filed its Form C a bit after 6:30 AM. Early risers! Eager beavers! (Maybe too eager, since an amendment was filed less than two hours later--apparently because the attendant Form C .pdf was rejected in the initial filing.) The firm's subsidiary is a moonshine-based liqueur producer. At this writing, $11,700 of the target threshold funding of $300,000 (1000 units at $300 per unit) has been committed--$288,300 to go! ($600 came in while I was typing this post.) And it looks like the base of operations is in West Virginia, Josh! Do you know these folks? (Slogan: "Take a Shot on Us.")
StarEngine also is hosting another crowdfunded offering filed today. The issuer on this offering, GameTree PBC (yes, Haskell, a public benefit corporation!), a social network for gamers based in Solana Beach, California. GameTree is selling common stock at $2 per share and has set a threshold funding target of $100,000. As of this writing, the firm had raised $8,360--$91,640 to go. The Form C filing for this offering also was amended. The reason? "Needed to re-upload campaign screen shots. First upload did not work." So, it seems there may be some glitches--or at least propensities for operator error.
This is pure spectator sport for me right now. I am interested to see that issuers are actually fling and that offerings are attracting some financing commitments. But some of what I am reading is pretty funny stuff. I don't have time to do a play-by-play on any of these filings (too busy a week this week). I must admit that I am especially amused by this "financial risk factor" in the GameTree materials:
Management has no experience managing companies with publicly traded securities.
The legal issues related to public securities are Byzantine and myriad. While it is our intention to follow the law as we understand it and seek the advice necessary to follow best practices, we recognize that mistakes with negative financial results to investors can occur. Crowdfunding is a new method for raising capital and laws are quickly changing and evolving. Changes in securities law may void and/or alter equity arrangements with shareholders.
I just had to quote that one here . . . . I nearly fell off my chair laughing. And here is the GameTree risk factor on benefit corporation status, so Haskell can have something to look at and consider:
GameTree is a public benefit corporation and thus may engage in activities in pursuit of its public benefit at the expense of financial gain.
Unlike traditional corporations in which operations and business goals are tied exclusively to the pursuit of profit, GameTree may also take actions in alignment with its stated public benefit at the expense of profit maximization. It is still a forprofit corporation in distinction from a charitable nonprofit which has a benefit as its sole purpose.
These disclosures are not what I would've drafted in either case. But neither disclosure is inaccurate, in my view. And each is relatively simple.
It will be interesting to continue to look at some of the SEC filings and related online disclosures as time passes. I hope to be able to devote additional time to that after I have finished grading exams and papers. In the mean time, I would enjoy reading your reactions here.
Thanks for the comment, Georgia. Your insights on the filing process are very helpful. And I also am impressed by your patience and diligence (and that of other issuers) in handling these little hiccups. Good luck with your offering.
Posted by: joanheminway | May 17, 2016 12:14:28 PM
This post is great. Arrived at this site after reading Gametree's disclosures and doing a google search for more info. Will you have more posts footnoted.com-style?
Posted by: John Mark Wendler | May 30, 2016 11:22:18 AM
Thanks for the feedback/support, John Mark. I do expect to have more posts on securities crowdfunding this summer, although I am not sure in what style they will be written. (I tend to let the subject dictate the nature of the post.)
Truly glad you liked this post. If there is a particular area in which you are interested, let me know here or by email. My current academic work involves crowdfunding intermediation and is not restricted to securities crowdfunding, btw, in case you wanted to know.
Again, thanks for letting me know about your interest in this post and for inquiring about future posts.
Posted by: joanheminway | May 30, 2016 11:32:23 AM
Joan, you are absolutely correct. There were several glitches in the SEC's Edgar system on Monday, including that it was not accepting certain PDF files. Several companies were not able to file their PDFs until much later in the day. Unfortunately with the system, when filing in XML, you cannot always tell before filing if the PDF is accepted or not, so your filing goes through without the PDF. That is what happened to us with Bloomery. Fortunately, we were able to get the PDF through in an amendment, and all is right with the world. Also, the SEC seems to have gotten the kinks out by today, which is pretty good for a government institution. Thanks for taking an interest in our burgeoning new industry, and I too am enjoying these disclosures!
Posted by: Georgia Quinn | May 17, 2016 12:06:34 PM