06/19/2012 05:34:00 PM EST
Crowdfunding to Build a Shareholder Base?
Today's DealFlow Report notes that Rodman & Renshaw's John Borer (disclaimer: client), a member of the SEC's Advisory Committee on Small and Emerging Companies, stunned his fellow committee members recently. He suggested that crowdfunding could be used as a way to "populate" a company with sufficient shareholders to qualify to uplist to a major exchange.
As we know, to get to Nasdaq or Amex, one requirement is a certain number of shareholders, between 300 and 500 depending on the level. Previously, a trading shell was a way to provide that base, or a public offering. Since both are more difficult now, Borer was suggesting using crowdfunding for that purpose.
Interestingly, the article suggests that an SEC staffer pulled Borer aside and off camera thanked him for pointing out the "loophole." Borer suggested he didn't believe it was a loophole.
Can this work? Very possibly.
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by David N. Feldman, Esq., Partner of Richardson & Patel LLP.
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