FinLaw:  Who will buy your company’s stock?

By Scott Andersen, CrowdfundBeat Guest Contributor, Principal at finLawyer.com

There is a maxim used by securities professionals that “stocks are sold, not bought.”  This maxim summarizes the view that for a securities offering to be successful, it needs a broker-dealer to solicit and recommend the offering to prospective investors.

Now with the JOBS Act and companies selling securities directly to investors through general solicitation (advertising), the question is raised:  who will buy your company’s stock?  Moving away from a broker-dealer to reliance on advertising alone requires careful planning for an offering to be successful.  This is difficult for a company that has not raised capital before.  For one, there may be no securities professionals involved in structuring the offering, or marketing or selling it.  Other professionals, such as attorneys, may recommend a Reg A offering but are not retained to provide guidance on how to market a successful offering.  Failure means a blow to a company’s reputation and coffers; simply wasted money.

To raise capital under Rule 506(c) or Reg A, a company must plan carefully its marketing campaign, including how it will attract interest in its securities offering, how it will draw visitors to its website hosting the offering, and why it is likely that an investor will press the “invest now” button and invest?   The company is driving the ship here, and must take responsibility for the offering to be successful.  If the company lacks the experience or confidence to do so, it should hire a broker-dealer to solicit the offering as this will increase its odds of success.  Broker-dealers have existing relationships with investors whom they can solicit and can provide advice on the terms of the offering.  A company initiating a marketing campaign needs to find ways to introduce itself to the public and network to and develop relationships with prospective investors.  The marketing should not be limited to creating a website and video and then expecting investors to come find the company as this alone generally will not work.

A few things to consider:

While a company may view its securities offering as great and a no brainer, others including prospective investors may not necessarily see it the same way.  A company needs to market the offering, and in a manner compliant with securities laws.

Who is the targeted audience?  Customers of a company and true believers are an ideal target audience.  If not them, who?  And what is the marketing strategy for reaching them?

Is a Reg A the right type of securities offering?  Maybe a Reg D or Title III make more sense initially, especially if this is the first time a company is raising capital.  In this way, a company pays lower legal fees while having an opportunity to test its online marketing strategy, the offering is ready to launch faster, and with Title III, a company can tap into a funding portal’s network of investors.

The minimum offering should both help a company take the next step in growing its business and be low enough that it is realistic for the company to successfully raise this amount.

A securities offering is not a race, and speed is a lot less important than success.  Careful planning of a company’s marketing strategy is essential, and the company should obtain the help it needs to be effective, persuasive and compliant.

The key goal for any securities offering is to be successful.  Without a proper marketing strategy, how can any company expect to attract visitors to a website to invest?  Without a proper marketing strategy, the answer to the question of who will buy your company’s stock is clear:  possibly no one.

***

About :Scott Andersen
Scott is principal at finLawyer.com and General Counsel of FundAmerica. He was most recently the Deputy Regional Chief Counsel at FINRA, and prior to that was the Enforcement Director at FINRA and the NYSE, Co-Chief of the Securities Prosecutions Unit of the NY Attorney General’s office, and Asst. Attorney General for the State of NY.  He concentrates his practice on securities law and regulatory defense.

The information in this article is provided for general informational purposes only and is not intended to be legal advice.  The issues discussed include complicated areas of law and legal advice should be obtained from a securities attorney about your specific circumstances.

187d2c8

About Scott Andersen:
Scott is principal at finLawyer.com and General Counsel of FundAmerica. He was most recently the Deputy Regional Chief Counsel at FINRA, and prior to that was the Enforcement Director at FINRA and the NYSE, Co-Chief of the Securities Prosecutions Unit of the NY Attorney General’s office, and Asst. Attorney General for the State of NY. He concentrates his practice on securities and regulatory law.

The information and materials in this article are provided for general informational purposes only and are not intended to be legal advice. The issues discussed include complicated areas of law and legal advice should be obtained from a securities attorney about your specific circumstances.

 

Tags: , , , , , , , , , , , , , ,

HEADLINE NEWS

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news [...]

The VergeNeill Blomkamp's Firebase crowdfunding campaign comes to an ...The VergeJust over a week after announcing its crowdfunding campaign to fund a sequel to its short concept film Firebase, Neill Blomkamp's Oats Studios has pulled the plug on the project, and says that i [...]

ForbesNeed To Fund Your Health Idea? How About Crowdfunding? - ForbesForbesGot an idea that you think will change the face of health or public health? Don't know where to go to get funding to launch the idea? Worried that you won't be able to convince one person or one organ [...]

Billy PennMore than in other cities, Philly families resort to crowdfunding for funeral costsBilly PennOf the top 45 crowdfunding campaigns in Philadelphia currently listed on the site, 25 are looking for help paying for memorials. GoFundMe recognizes the need, and even has a page ded [...]

Stuff.co.nzJeremy Elwood and Michele A'Court: Crowdfunding is like buskingStuff.co.nzStormy Daniels is currently raising US$75,000 a week through crowdfunding to cover her legal expenses against Donald Trump. OPINION: Husband-and-wife comedians and commentators Jeremy Elwood and [...]

WDJTWoman accused of stealing from crowdfunding account she set up for grieving familyWDJTMINNEAPOLIS (WCCO) — A 49-year-old Minnesota woman faces charges for allegedly stealing money from a crowdfunding account she set up for a family who suffered a loss, according to the Hennepin Co [...]

Joplin Globe'Grow with us': Empire Market launches crowdfunding effort ahead of openingJoplin GlobeTo help provide those amenities, Downtown Joplin has begun a crowdfunding effort ahead of the market's Saturday opening day. DJA was the only Joplin-based organization sel [...]

FierceBiotechCNS Pharma turns to crowdfunding to advance glioblastoma drugFierceBiotechCNS Pharma has launched a fundraising drive for a phase 2 study of a drug for glioblastoma, the form of brain cancer that has claimed the lives of Senator Ted Kennedy and Vice President Joe Biden [...]

Popular ScienceAnker's smart home brand is crowdfunding a new security systemPopular ScienceWe don't typically post about Kickstarter campaigns, but Eufy—like their parent company Anker—makes excellent products that are more reliable and interesting than the average crowdfun [...]

Crowdfund InsiderPremium Cider Brand Cranes Launches Second Equity Crowdfunding Campaign on SeedrsCrowdfund InsiderCranes, a UK-based premium cranberry cider brand, has launched its second equity crowdfunding campaign on Seedrs. The debut of the latest funding round comes less than tw [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |