Advertise Private Stock for Sale to Investors (now its legal!)

(Updated Sept 12, 2013)  It just got a little bit easier to raise money from angel investors. On July 10th, the SEC lifted a long-standing ban on “general solicitation for private securities deals“, which means that companies will now be able to advertise their stock for sale. Private equity dealers are calling the rules “transformative” because it is the first real change implemented under the 2012 JOBS Act.

By lifting the ban on general solicitation, the SEC has created a new private equity offering called a 506(c), that will let private companies advertise their stock for sale to accredited investors.

Before you go out and buy an add in the Wall Street Journal, however, keep in mind that there will be other hoops to jump through (this is the government, remember).  To keep ads honest and encourage more disclosure, the SEC also proposed changes to Form D (which issuers file with all 506 offerings). The changes mean that you will have to submit Form D prior to advertising stock for sale, rather than after the first sale of securities (as is currently the case).

It now appears that all of these changes will go into effect on September 23, 2013.

Bottom line:  The good news is that it will be easier than ever to get the word out about your offering of equity.  The bad news is that there will be a waiting period between filing a Form D and actually doing any advertising.  If you have investors chomping at the bit (or just want to strike while the iron is hot!), the new rule could actually slow you down.

So if there’s a private equity offering in your future, keep the changes in mind while planning your timeline — closing might be a little bit later than you’d like!  In any case, now’s the time to find a great CFO and get tuned in to the pending changes.

Dedicated to your (investor-funded) profits,  David

photo credit: brendan wilkinson via photopin cc