Emerging Markets Law

Showing 8 posts from March 2014.

Invest Georgia Exemption / Presentation from Secretary of State

The lawyers from the General Counsel's Office of the Georgia Secretary of State have put together a helpful presentation on the Invest Georgia Exemption - Georgia's intrastate crowdfunding rule.  (Hat tip: Stephen Wright).

The presentation doesn't break any new ground (and you wouldn't expect government staffers to do that) but it is helpful to see the SOS staff promoting its own regulatory innovations.  Their efforts help practitioners reassure nervous clients that the Georgia intrastate crowdfunding rule really is intended to work the way it does.

A Warning to In-House Attorneys Regarding Whistle-blowers

Sean McKessy, whistleblower chief at the SEC, warned in-house attorneys recently of the dangers of crafting confidentiality agreements and separation agreements with employees that are intended to give incentives to those employees not to pursue whistleblower complaints.  In remarks at a conference at Georgetown Law School he indicated that the SEC was "very concerned about" in-house attorneys creatively drafting employee-facing contracts with a view towards rewarding employees for not pursuing whistleblower claims.

McKessy claimed that in-house attorneys that undertook such actions intentionally could be subject to discipline by the SEC.

This is a serious risk for in-house attorneys who often find themselves preparing confidentiality agreement and separation agreements for departing employees.  Such forms routinely require the departing employing to keep the company's information confidential and often require the department employee to avoid making any disparaging statements regarding the company, its management and its business.

It would be very easy for the SEC to misconstrue standard, boilerplate language if this type for an intention on the part of in-house counsel to tamp down a whistleblower claim.  In-house counsel should be on their guard for fact patterns in which they become aware of the potential for a whistleblower complaint.

One affirmative step in-house counsel could take would be to add to standard employee-facing documents a representation by the employee that the employee is not presently aware of any facts or circumstances that could comprise a whistleblower complaint.

The downside of this approach, however, is that such language is likely to draw questions from the employee as to what, exactly, might comprise a whistleblower complaint.  The ensuing discussion between in-house employee and the departing employee could, in theory, raise the risk for the in-house attorney if the department employee believed there were facts or circumstances that were potentially in range of a whistleblower issue.

Trends in Private Offerings

The Crowdnetic February 2014 report on private offerings contains a wealth of information on trends in private offerings.  The Crowdnetic report is intended to cover "private issuers publicly raising" (PIPR) funds under Regulation D.  The report is compiled from data collected from Form Ds filed with the SEC under Rule 506.

As of the end of February, 2014:

  • There were 2,594 active PIPRs with capital commitments of approximately $116.6 million;
  • Of these, 37% were for Service companies and 25% were for Technology companies;
  • Of the cash raised in February, the greatest amount was for real estate development (comprising $17 million of the $36 million raised in the month);
  • Geographically, the western U.S. accounted for the greatest number of PIPRs and the greatest amount of cash raised.  (The South came in second); and
  • Although the highest number of offerings are equity offerings, convertible debt offerings raise more cash.

Crowdnetic's approach of compiling and publicly-releasing this data is a smart one.  As the number and size of PIPR offerings increase the opportunities for data-mining, and the value relating to those efforts, will also increase.

How Much Do I Need to Sell?

Entrepreneurs everywhere should check out this app from my friend Jeff Jahn. The app calculates how many units of an item you will need to sell in order to achieve a target profit based upon the unit cost of the item.

It will tell you how many units, per day and per month, you'll need to reach your goal in a year.

Crowdfunding for Solar Energy

This piece on Fool.com talks about the potential for crowdfunding to provide some of the missing parts for financing residential solar deals.

I empathize with those who wish that residential solar could be easier and more affordable but I'm skeptical that it will become a reality anytime soon.  There are still a host of regulatory (think zoning and tax credits) and technical (think on-site service calls when something goes wrong) hurdles to be overcome.

The commercial market, however, is another story.  The market for construction and permanent financing for commercial solar projects is still undeveloped.  These projects have more robust tax credits (often 35% of the construction cost) and are large enough to have economies of scale when it comes to regulatory and technical hurdles.  Nevertheless, commercial banks rarely participate in financing these deals and private equity is hard to find.

A model that would allow individual investors to participate in commercial-scale solar projects could have some potential.

Kickstarter Reaches $1Billion Mark

Posted In Crowdfunding

Crowdfunding pioneer Kickstarter announced that its projects exceeded $1 billion in total pledges from all of the projects listed on its site.

The crowdfunding site announced that it had received pledges from 5.7 million people in 224 countries.  Of these, more than $663 million came from pledges in the U.S., with donors from the UK pledging $54 million.

One of the interesting facts from the announcement is that Wednesday is the most successful day for the pledges.  In addition, more than half of all funds pledged on a project come in the first month of pledging.

P2P Lending Analysis

Posted In Crowdfunding

Check out my latest post on P2PLendingExpert on the different between accredited-investor-only P2P sites and those that allow any investor to invest (like Prosper and Lending Club).

AngelPool Investor Meetup 2014

Posted In Crowdfunding

I had a great time earlier this week at the AngelPool Investor Meetup at Georgia Tech.  Georgia Tech has a lot going on with respect to technology start-ups and I was honored to speak on the panel discussing the JOBS Act and the Invest Georgia Exemption.

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