As mentioned below, there was a recent view expressed that #crowdfunding can be used to build a shareholder base for a company about to go public, avoiding the need to build that base in a retail (vs. institutional) public offering or through a shell. But there's a slight wrinkle.
The language of the statute says, "the aggregate amount sold to all investors by the issuer, including any amount sold in reliance on the exemption [from SEC registration] provided under [crowdfunding]... during the 12-month period preceding the date of such transaction, is not more than $1,000,000."
What do most people think this means? That your total fundraising from all sources,including crowdfunding, can't be more than $1 million counting the crowdfunding and all other fundraising in the 12 months before the crowdfunding event.
But it looks back 12 months. This means if you haven't raised any other money in 12 months you can go ahead and do a $1 million crowdfunded deal and then the next day raise any additional funds you want. What you can't do is raise the larger amount before crowdfunding.
Could any of this change in the SEC rulemaking expected later this year? Probably not because these are built into the statute. Just keep this in mind as we keep watch on our SEC friends.
For additional insights on reverse mergers, SPACs, other alternatives to traditional initial public offerings, the small and microcap markets and the economy, visit the Reverse Merger and SPAC Blog by David N. Feldman, Esq., Partner of Richardson & Patel LLP.
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