Dilution describes a reduction in control, earnings or value of the shares due to the company issuing additional shares. If the company decides to issue more shares, an investor can experience value dilution, with each share worth less than previously, and control dilution, with the total percentage an investor owns being less than before. There may also be earnings dilution, with a reduction in the amount earned per share. However, this typically occurs if the company offers dividends, and most companies seeking crowdfunding are unlikely to offer dividends.
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An investor holding crowdfunding securities has limited exit options. These include selling the securities back to the company, selling to an accredited investor, selling in a registered offering of securities (e.g. an IPO), selling to a family member on death or divorce, and other restrictions imposed by the SEC.
An exit for investors is an event that allows the investors to get their money (or some of their money) back. For example, when a company makes an IPO, the existing investors may be able to sell all their shares in the same public marketplace. However, if the stock is not publicly traded, the investor will need an event such as a private sale of the investment in order to recover the investment. In general, an investor cannot exit an investment and recoup his gains (or losses) unless there is a marketplace where such investments can legally be offered and sold (and these are rare for small holdings of securities) or another investor (such as a VC group) offers to buy the securities.
All offers and sales of securities must be registered under Section 5 of the Securities Act of 1933, or covered by an available Exemption. The SEC takes a broad view as to what is an "offer," so any kind of "market conditioning," i.e., something that makes you want to make an investment, is considered an "offer" of securities. Companies need to file a registration statement with the SEC before selling shares to the general public, i.e. an Initial Public Offering. There are exemptions available, typically for accredited investors or qualified institutional buyers, and the new crowdfunding exemption as provided under the CROWDFUND Act.