Global Edge International Consulting Associates, Inc.: IPOs

Showing posts with label IPOs. Show all posts

Sunday, November 1, 2015

Equity Crowdfunding Has Landed!

Equity Crowdfunding Has Landed

Now Anyone Can Participate In StartUp IPOs.

Investment Bankers? Prepare To Be Disrupted And Displaced.

Promising New Companies Have A New, Easier, Cheaper Source Of Capital

By Douglas Castle for GEI Consulting and The Global Futurist Blog

NOTE: THE INFORMATION CONTAINED IN THIS ARTICLE SHOULD NOT BE CONSTRUED BY THE READER AS BEING LEGAL, FINANCIAL, TAX, ACCOUNTING, ECONOMIC OR INVESTMENT ADVICE. NO OFFERING OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY IS MADE HEREBY, NOR IS A SOLICITATION FOR THE PURCHASE OF SECURITIES OR OTHER INVESTMENT INTERESTS OF ANY TYPE IN ANY ENTITY MADE HEREBY. THIS ARTICLE IS INTENDED FOR GENERAL INFORMATIONAL PURPOSES ONLY AND REPRESENTS THE VIEW OF THE AUTHOR ONLY.

THIS ARTICLE IS COPYRIGHT 2015 BY DOUGLAS E. CASTLE, WITH ALL RIGHTS RESERVED. ANY REPRODUCTION, TRANSMITTAL OR DISTRIBUTION OF THIS ARTICLE, EITHER IN WHOLE OR PART, IS UNAUTHORIZED AND MAY BE UNLAWFUL, UNLESS FULL ATTRIBUTION IS GIVEN TO THE AUTHOR AND ALL LINKS IN THE ARTICLE REMAIN INCLUDED AND “LIVE.”

The Securities & Exchange Commission (SEC) has now approved and promulgated (by publication) the Final Rules for Title III Equity Crowdfunding under the JOBS Act legislation. In a few months, any investor, regardless of income and net worth, will be able to participate in a startup company by purchasing shares or debt (bonds, etc.) and earning a return on investment in the form of capital gains, dividends or interest.

This is truly revolutionary in the world of crowdfunding, which has been dominated since its inception by rewards-based and donation-based funding approaches. These offerors, featuring their pavilions on such sites as Kickstarter, Indiegogo and GoFundMe, were not permitted to offer securities to participants. Now, that has all changed.

If a startup or entrepreneurial enterprise wants to raise money by selling its shares, bonds or notes to the public, it may now do so on one of any number of duly-licensed internet-based platforms, often referred to as “portals”. Equity crowdfunding will disrupt the traditional capital markets, and will eliminate much of the expensive and extensive compliance requirements associated with typical private placements (offerings to a limited number of investors pursuant to the terms of a private place confidential offering memorandum), and initial public offerings (sold by prospectus through investment banking and securities brokerage houses).

There are, of course, certain rules and restrictions on the amounts of such offerings, and on certain other aspects of raising money through securities offerings orchestrated through internet-based crowdfunding, which can be done by licensed and registered securities broker-dealers and a new class of less-restrictively regulated entities called “funding portals”. Some of these restrictions are highlighted briefly in an article in Fortune magazine:

http://fortune.com/2015/10/30/its-official-startups-can-soon-raise-money-from-your-grandma/

Another article which sheds some further light on this dramatic change in the possibilities for startups to raise operating capital through securities crowdfunding can be found in an article in Forbes magazine:

http://www.forbes.com/sites/chancebarnett/2015/10/30/sec-approves-title-iii-of-jobs-act-equity-crowdfunding-with-non-accredited/

The most comprehensive outline (merely a hint) of the newly adopted rules and restrictions is set forth in a press release put out by the SEC itself:

http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370540017677

A quick synopsis of some of the potential changes anticipated to trend through equity crowdfunding via investment bankers and portals follows:

=> There will likely be a decline in the percentage of entrepreneurial companies seeking funding in excess of $25,000.00 - $50,000.00 through the traditional rewards-based crowdfunding platforms, and a dramatic increase in the number of startups listing themselves on portals, especially those nascent enterprises and projects seeking capital of between $100,000.00 and $1,000,000.00;

=> There will be a decline in the percentage of total startups seeking money from venture capitalists, angel investor syndicates and private equity sources. These last three categories of capital sources will still be seeing their share of larger (i.e., in excess of $5,000,000.00) fundraising deal prospects, especially where disruptive technological innovations are valuable proprietary intellectual property are involved; and

=> Some entrepreneurial offerors will be “working,” “gaming” and otherwise testing ceilings on crowdfunding offering amount limitations by experimenting with offering units featuring layers of warrants, aggressive conversion features and other ingenious ways of working within the written legal framework of the regulations, while possibly pushing the intended regulatory envelopes. Some of these crowdfunding experimenters will be seen as pioneers and others as outlaws (naturally);

=> There will be an economic stimulus to the US economy through a variety of channels including an increase in private sector permanent jobs creation in the small business sector;

=> A goodly portion of the fees generated by traditional investment banking firms will be shifting over to the owners of licensed and registered portals. Investment banking will be significantly disrupted, especially in the IPO market, while portals will be inundated with both supply-side and demand-side business and the income which is ordinarily associated with underwriting.

As always, thank you for reading me,

Douglas Castle for Global Edge International Consulting Associates, Inc. and The Global Edge International Blog

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Friday, August 14, 2015

Insiders Are Selling Their Shares? What Should I do?

Insiders Are Selling Their Shares!

What Does This Mean?

And What Should I Do Now?

By: Douglas Castle For Global Edge International And The Global Edge International Blog

When insiders, particularly officers, directors and owners of large blocks of stock (5% or more of the total shares issued and outstanding) are suddenly starting to sell off their shares of stock in a publicly-traded company, especially one in which you have an investment, before you take action, extend your very best efforts to try and determine what the underlying reason for the selloff is. Depending upon that reason (or reasons), you may wish to either: follow suit and liquidate some or all of your holdings; just sit tight and maintain your position; or actually purchase more shares. While this article does not provide financial, tax, investment or legal advice, it may help you in making a more-informed decision in terms of your own investment tactics or strategy with respect to your investment in that specific company. Since we at GEI Consulting are extremely imaginative, we'll refer to the subject company as “Company X”.

There are a host of reasons why significant shareholders may be selling off their shares in Company X, and an outline of some of the most prevalent possibilities are discussed below:

==+ They have come to the end of a statutory, regulatory or contractual stock holding period, and they are selling off some of their holdings to establish some liquidity – this is, of itself, harmless and is generally acceptable, especially in the second or third year following an IPO, or after a year or two of having commenced a C-Suite position in a more-established company.

==+ They are either retiring or contemplating retirement (they are at an advanced age) to pursue personal interests, and wish to 'cash out' to enjoy the benefits of a financially-substantial departure from a successful career.

==+ They are selling off shares and either reinvesting in Company X or lending the post-sale proceeds to Company X, presumably because Company X is illiquid or is accumulating losses. This type of activity can either be interpreted as admirable and positive heroics, or as a prelude to a death knell in the event that the tight cash situation is not just temporary or seasonal.

==+ If they are selling off shares (which they might have gotten very inexpensively early in Company X's evolution, or through the exercising of options or warrants) and using the proceeds to buy additional shares, it generally means that they believe that the stock is undervalued and is due for an increase through a market revaluation.

==+ If they are selling off substantial numbers of shares and not reinvesting proceeds in Company X, it generally means (barring an individual holder's personal financial hardship) that they believe that the stock is overpriced and is headed for a valuation adjustment in the downward direction.

Depending upon the circumstances (some of which are set forth above) and the underlying reasons, take action appropriately.

In order to get information on these substantial trades by influential shareholders, some good sources are these:

http://insidertrading.org/

http://www.insider-monitor.com/

http://insiders.morningstar.com/trading/insider-summary.action

http://insidertrades.org/

http://www.insider-monitor.com/insider_stock_trading_report.html

http://online.barrons.com/public/page/9_0210-instrans.html

http://www.secform4.com/

Generally speaking, the pundits (they generally like to call themselves that) tell us that when it comes to aggregate insider buying and selling, the following general rule applies [although in taking a close look at the individual circumstances involved as described above in this article, the general rules are possibly a gross oversimplification]:

When the buyers outweigh the sellers (in terms of number of parties and aggregate volumes), insiders are generally bullish (optimistic) about the short-term prospects of Company X;

When the sellers outweigh the buyers (in terms of number of parties and aggregate volumes), insiders are generally bearish (pessimistic) about the short term prospects of Company X.

Also, in the interest of keeping our nomenclature crystal clear:

"Insider trading" is a term that most investors have heard and usually associate with illegal conduct. But the term actually includes both legal and illegal conduct. The legal version is when corporate insiders—officers, directors, and employees—buy and sell stock in their own companies. When corporate insiders trade in their own securities, they must report their trades to the SEC.

Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information.

Thank you, as always, for reading me.