Navigating the SEC’s Action Against Zymergen: Key Takeaways on Market Size Disclosures
On September 13, 2024, the SEC settled charges against Zymergen Inc. for misleading investors in its IPO by overstating market opportunities and revenue prospects for its product, Hyaline, resulting in a $30 million civil penalty against Zymergen. Zymergen’s finance team projected a market size using assumptions that were inconsistent with analysis conducted by its internal […]
Understanding Reg CF Resale Restrictions
Understanding Reg CF Resale Restrictions General rule: if you read the SEC rules with blinders on, you are probably well on your way to getting yourself in trouble. Rule 501 of Regulation Crowdfunding states that shares issued in a Regulation Crowdfunding offering “may not be transferred by any purchaser of such securities during the one-year […]
CrowdCheck provides additional updates to issuer-dealer registration requirements for sales of securities under Reg A without a broker
One of the exciting things about securities law is that rules can and do change in response to concerns raised by companies and investors. We have seen this first hand in regards to the requirements for companies to register themselves as dealers of securities to sell their own securities in offerings qualified under Regulation A. […]
Can transfer agents save democracy?
A long time ago in what seems like a different universe, I was working on an IPO for a company that will have to remain unidentified in a country that never experienced Enlightenment thinking. The company’s CEO and majority owner decided to challenge the local dictator’s political leadership. Dictator X didn’t take kindly to that […]
Raising funds under Reg CF for acquisitions
There’s an interesting contrast between Regulation A and Regulation CF in terms of disclosure. Reg A requires that issuers provide financial statements for “businesses acquired or to be acquired.” Even if that’s not what the money is being raised for. If you just acquired, or are probably going to acquire, a business (and it doesn’t […]
Why Reg S doesn’t work with online offerings
Anyone who knows me knows my link with the SEC’s Regulation S. While folks sometimes refer to it as an exemption from registration under the Securities Act, it’s not. Reg S provides that the registration provisions of the Securities Act simply do not apply to offers and sales made outside the United States, and then […]
Subsidiaries using Reg CF
This came up no less than three times last week, so I figured it was worth a blog post. Subsidiaries can raise funds under Reg CF, even if they are subsidiaries of companies who cannot use Reg CF themselves, because they have a class of securities registered with the SEC, or they are not US […]
Why Reg CF doesn’t work for many VC-backed companies
Since the increase in the maximum offering amount to $5 million a couple of years ago, we’ve seen more interest in Reg CF offerings by venture-backed companies. Sadly, it doesn’t work for a lot of them. This is because of what we refer to as the “issuer aggregation rule”. Rule 100(c) explains that “issuer” for […]
I’m crowdfunding. Do I really need a transfer agent?
We keep hearing this question. To be honest, it’s not clear why a crowdfunding issuer would want to have to deal with the recordkeeping for what could be thousands of investors (and even if the issuer uses a Reg CF SPV, that itself is an issuer whose many shareholders have to be wrangled). But are […]
We took the money, and signed the subscription agreement, so when are the shares issued?
This is a question we often get from companies as they are trying to organize their cap table, or provide information to a transfer agent. Many companies seem to be of the belief that shares are not actually issued until a certificate is prepared, or that the shares are recorded on the company’s internal ledger, […]