Pour ceux qui ont lu la manchette sur CBC News lundi dernier « Over $1 Million in Equity Pledged on IPO Village for First Ever Equity-Based Crowdfunded IPO » et qui pensaient rêver, soyez rassuré, le financement participatif pour investisseurs n’est pas encore entré en vigueur aux Etats-Unis et ne le sera pas avant 2013, bien que le terme « crowdfund » soit mentionné 8 fois dans l’article.
J’ai eu depuis l’occasion d’en parler avec un avocat en valeurs mobiliêres et l’un des instigateurs du JOBS Act. Voici ce qu’ils nous disent (traduction de leur propos):
…lorsqu’une entreprise devient public, elle recrute une banque d’investissement pur etre le souscripteur qui vend ensuite les actions aux investisseurs insititutionnels et un groupe d’investisseurs prives. Dans le cas qui nous concerne, IPO VIllage est le souscripteur et oui, il peut prendre des engagements d’investisseurs puisque c’est leur role. Par contre et c’est la ou la difference prend toute son importance, IPOVillage offre ses actions au public, non pas aux investisseurs prives. Ceci etant, il s’agit bien d’une introduction en bourse (IPO) et non d’une offre de financement participatif pour investisseurs.
Sherwood Neiss, Partner at Crowdfund Capital Advisors and enabler of the JOBS Act.
Je pense que ce qui provoque la confusion est qu’ils [IPOVillage] utilisent le mot « crowdfunding » dans le contexte d’une introduction en bourse au lieu de celui d’une offre de valeurs mobilières d’une entreprise privée.
Gil Michel-Garcia, Patner at Blue HF and member of Invest Crowdfund Canada – Quebec.
Dit simplement, le cas présent porte sur une entreprise (dispostifs médicaux) qui entrera en bourse, qui sera donc publique. Bien que l’article fasse référence au « equity-based crowdfunding » (financement participatif pour investisseurs), ce nouveau mécansime ne s’applique qu’aux entreprises privées. IPO et Equity-based crowdfunding dans la même équation ne fait pas sens.
J’accueille vos commentaires. Merci.
Actually and literlly, the first ever equity-based crowdfunded IPO was done on Wall Street many many years ago. By definition, an initial registered public offering or IPO is inherently an equity based crowdfunding event more than anything. The company has registered to sell its shares (equity) to the general public (crowd) through a central market platform. This is not only a perfect description of the traditional IPO but it is actually the original intent of the stock market and IPO. So you see, today’s adaptation of the concept of equity crowdfunding differentiates only as it applies specifically to the internet’s currently narrow form of a « crowdfunding platform ». I believe that will soon change, when all realize that all we are now simply attempting to accomplish is to broaden the already existing mechanism of crowdfunding in the stock market with the ability of doing so on alternative digital platforms and for a broader range of private younger and earlier stage companies. With regards to the Jobs Act and the 2013 deadline, we are hopeful that they will finalize the rules for this new advanced form of Equity crowdfunding that can open the doors for this type of funding from being exclusively available to publicly registered offerings but to also be a venue for private offerings from private companies as well. This would be a wonderful and welcome advance in the financial markets.
Hi Simon – thank you for opening the discussion. I agree in part. Yes, indivual investors can purchase stock on line from an existing public company, this has been going on for decades. Equity-based crowdfunding however, as stipulated in the JOBS act is intended in part for (private) SMEs to help them raise capital (50-500k). I’m afraid that if we start mixing terminology, it may create confusion. My team at Invest Crowdfund Canada-Quebec is working on educating the community with regards to Equity-based Crowdfunding and its benefits to the national economy.
I think what you are doing is great and necessary. We ourselves are engaged in many similar initiatives with the same objectives. It is important to note that our firm, First Line specializes in a special kind of IPO. Specifically IPOs for young emerging growth companies. In reality our message is the same and we are speaking in many cases on behalf of the same businesses. We are both looking for ways to have equity crowdfunding help small businesses raise capital for expansion in order to grow jobs and build back our economy. The only difference is in how we technically achieve equity-crowdfunding for these small companies. Many, as yourself, are going the private and Jobs Act route and many others are going about it technically different. Some for example are sticking to private but are still not going the Jobs Act route, by simply soliciting only accredited investors (ie. http://www.microventures.com who has been around and using the term equity-crowdfunding for a while). IPO Village, while clearly utilizing the current equity-crowdfunding model, is addressing the same hurdles as everyone else, but by going the public route and therefore also not needing to come on to the Jobs Act. In the end, we are all on the same equity-crowdfunding boat, with the same objective of helping small business grow in order to fix the bigger picture. I just don’t believe nuanced differences in approach justify dividing the equity crowdfunding camps, when in actuality we agree on really everything.
Important note; As it happens, IPO Village is a not-for-profit public information site and takes no commissions or fees of any sort. They are definitely not underwriters. The whole purpose behind the site was to create a way to cut out the costly middlemen, in this case it would be the underwriters. Public offerings on IPO Village are sold directly from the company without any underwriter directly to the public with no underwriting fees being deducted from the proceeds to the company. This is often referred to as a Direct public offering or DPO. Many larger public companies conduct these offerings regularly through their own websites, such as Home Depot. It was First Line Capital, VStock Transfer and several other associate firms from the investment banking and private equity communities who brainstormed the IPO Village marketplace as an alternative to the stock market for crowdfunding these IPOs directly to the retail investor. We then pooled our resources and IPO Village was born.
I am truly happy there are forums like this where people have the opportunity to clear up any misunderstandings that can be floating around there in cyberspace.
Good Work dianay!
« IPO and Equity -based Crowdfunding do not fit in the same equation »
This statement is simply and factually incorrect. Not only is an IPO a prime example of equity-based crowdfunding, but it is one of the oldest examples of it. The stock market. In an IPO a company sells its shares (equity) to the general public (crowd) via an electronic platform designed to be a central destination for the crowd to fund the IPO. There you have it, true Equity-based Crowdfunding. The fact that it is being adapted currently to a new medium online, does not make it a new concept. It also does not detract from the revolutionary elements of the crowdfunding movement, simply because it has history.
Diana.
I don’t disagree with anything that Simon has said from a legal perspective – although have to admit that I am not that familiar with Directed Public Offerings.
I guess we will need to refine our lexicon to describe the various types of Crowdfunding activities taking place in the market
a) Reward-based or donation based Crowdfunding (a la http://www.kickstarter.com) – (NO JOBS ACT implication);
b) Short-term Debt Crowdfunding (a la http://www.40billion.com) (No JOBS Act implication);
c) Accredited Investor Private Equity Crowdfunding ( a la http://www.circleup.com) (this will soon be liberalized by the effectiveness of Rule 506(c) of Regulation D as amended by Title II of the JOBS Act);
d) Section 4(6) Private Equity Crowdfunding (to be done exclusively through SEC Registered Crowdfunding platforms under the new Section 4(6) exemption created under Title III of the JOBS Act);
e) Public Equity IPO Crowdfunding (through a US registered broker dealer, or through a site like IPO Village).
How, the world of equity financing on the internet is changing fast.
Let’s hope that we can all keep up.
In SEC regulatory terms, I concur with Mr. Neiss’ point, that IPO Village’s offerings would be considered IPOs and not « crowd offerings »… even though they are not underwritten.
Hi Simon – sry for late reply, a few bugs on the site needed some fixing. Thank for this last comment which sums up my article.
When I last presented at Montreal New Tech, donation-based and equity-based crowdfunding were two concepts in need of clarification https://fr.slideshare.net/DianaYazidjian/invest-crowdfunding-montreal-new-tech.
Semantics is everything. Most especially when educating on a nascent approach. Our role here at Invest Crowdfund Canada is to do just that. Even more so when an article puts IPO and crowdfunding in a same sentence, this can lead to different interpretations.
In short, IPOs are not done online via a platform soliciting the crowd. The crowd may be sollicited to buy public stock but that is not crowdfunding per say. Best regards, Diana
Direct IPOs were conducted over the Internet as early as around 1995 right here in the USA with Wit Capital. They were very successful with their offerings but closed up shop in 2000 due to the Internet bubble bursting.
You can do a search on Wit Capital and you will find many results. Here is a couple:
Excerpts: First paragraph
1) Wikipedia
Merger with Wit Capital
At the peak of the dot-com bubble in early 2000, SoundView merged with Wit Capital (formerly Nasdaq:WITC) to form Wit SoundView in a $320 million all-stock transaction.[2] Wit Capital had been founded just a few years earlier, in 1996, by Andrew Klein. Wit positioned itself as an online investment banking firm focused exclusively on the Internet and technology sectors. Wit had pioneered several bubble-era innovations in investment banking including a « first-come, first-serve » approach to public offerings.[3] Wit had been backed by Goldman Sachs, which sold its stake in 2001.[4]
https://en.wikipedia.org/wiki/SoundView_Technology_Group#Merger_with_Wit_Capital
2) Wit Capital: IPOs for Everyone
By Tom Taulli | May 16, 2000
Page 1 of 1
« While IPOs are still allocated mostly to institutions and wealthy individuals, this has been changing. More and more, individual investors are also participating in the new issues market. The pioneer in this industry has been Wit Capital . The company was started several years ago by an ex-Wall Street attorney, Andrew Klein, who wanted to raise money for his microbrewery. When every venture capitalist rejected his business plan, he went direct to the people. Literally. He launched his IPO via the Internet. »
https://www.internetnews.com/bus-news/article.php/363041/Wit+Capital+IPOs+for+Everyone.htm
3) Wit Capital Corp. (https://www.witcapital.com)-the world’s first Web-based investment bank (see « New Issues, New Medium, » June ’97, RR)-opened for business in September, has participated in two IPOs, and is promising to soon originate some of its own deals.
For its first act, Wit allowed investors to open accounts with a minimum deposit of $1,000, download a red herring and put in orders to buy shares in IPO Radcom Ltd., an Israeli-based network test equipment manufacturer. The deal was underwritten by Unterberg Harris of New York City, with Wit as part of the syndicate. Wit’s investors got their shares on a « first-come, first-serve » basis, says Wit founder Andrew Klein, « in sharp contrast to any other retail broker. »
https://wealthmanagement.com/archive/internet-based-wit-capital-does-first-deal
4) Wit Capital Masters Net Ipos
THE MONEY PEOPLE
BY AMY FELDMAN
Monday, February 15, 1999
Wit Capital founder Andy Klein pioneered the idea of bringing companies public over the Internet.
Now there’s talk that Klein and his team of investment bankers and Internet analysts want to bring their own Manhattan-based firm public in a deal expected to capture the attention of Wall Street and individual investors alike.
« I think that may happen before you know it, » Klein said. « It’s certainly something we’ve begun to think about in our spare moments. »
https://articles.nydailynews.com/1999-02-15/news/18106297_1_spring-street-brewing-wit-capital-charles-schwab
So as you can plainly see, crowd funded Internet IPOs were around long before the Jobs Act or this new crowdfunding industry.
Thks for following up, Simon. Here’s the question I posted on IPO Village that perhaps you can find answer to. Why do you think this not referenced on Goo and why was the last activity traced back to 1999?
I’m sure our readers would want to know.
As I mentioned in the above reply, do a search for Wit Capital on Google and you will find many results. Wit Capital essentially shut down due to the Internet bubble burst after a merge in 2000.
All the articles cited above are Google results.