The Questionable Line Between Crowdfunding And An Illegal Securities Offer; The Pabst Brewing Case Study

from the this-won't-last dept

Thu, Feb 25th 2010 10:15am — Mike Masnick

We're certainly among those interested in various "crowdfunding" options out there for various business models, but the ones that seem to work are situations where people are buying something specific for their money, rather than buying "ownership" in a product or company. Once you're trying to sell ownership, you're basically offering equity, and I would imagine that's a huge no-no to the folks at the SEC who very, very, very carefully regulate any sort of equity offer. Mark Glaser points us to the fact that two ad agencies, upon hearing that the Pabst Brewing Company was up for sale decided to set up a website called Buy A Beer Company, with the goal of getting people to pledge a bunch of money that could be used to buy Pabst.

The website has the typical "tiered" options that we've seen from other crowdfunding offers (though, what you get at each level isn't clearly explained). I'm assuming that this is something of a PR stunt by those ad firms, but I'm wondering if they may run into some serious legal problems pretty quickly. They're basically offering unregistered securities in another company without having gone through any of the rather strict legal process required to make any sort of investment offer of this nature. Even if it is just a joke, it seems like the kind of joke that could end up with people in court.

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Filed Under: crowdfunding, offers, securities
Companies: pabst brewing

17 Comments

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Vince, 25 Feb 2010 @ 11:07am

They might be ok -- from the website it seems that they are not offering any ownership interest in future profits, but rather "enough beer to match your pledge" and a certificate. Thus, people paying are not "led to expect profits solely from the efforts of the promoter or a third party."

I think this is probably a joke though. I don't see how they could actually make it work.
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Shawn Tutt, 25 Feb 2010 @ 11:19am

The disclaimer at the bottom says "This is not a solicitation for monetary funds." Thinking this is not for real.
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John Doe, 25 Feb 2010 @ 11:26am

The real question is...
...why would anyone want to buy Pabst, the beer or the company? :)
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- AC, 25 Feb 2010 @ 11:28am
  
  Re: The real question is...
  Real men with large swinging genitalia.
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- Sean T Henry (profile), 25 Feb 2010 @ 1:07pm
  
  Re: The real question is...
  I drink Pabst it is good cheap beer currently it is still one of the few American beers and I believe it is union ran.
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Anonymous Coward, 25 Feb 2010 @ 11:29am

You Get Nothing
My guess is that you get beer if you donate or nothing at all. "You must by 21 to donate" The tier's make it sound like you get beer in return for your money bottle, 6-pack, or case. but most likely they will not do anything and never call in those pledges
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Anonymous Coward, 25 Feb 2010 @ 11:33am

Heineken? Fuck that shit! Pabst Blue Ribbon!
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- Anonymous Coward, 25 Feb 2010 @ 11:46am
  
  Re:
  For such a modest price, you get a beer that you taste twice!
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  - Anonymous Coward, 25 Feb 2010 @ 12:11pm
    
    Re: Re:
    (Replied to myself) Google tells me we had different references. GP had a movie reference that I've never heard of and mine was from the song "Pabst Blue Ribbon" by Ceann, that quotes the movie. That part of the song makes sense now!
    
    http://www.youtube.com/watch?v=_jdt36HySBs
    
    Side Note: Ceann has done a great job at connecting with fans, including trips to Ireland with the band (they're an Irish-American band). From what I can tell, they make most of their money touring and selling CDs, shirts, etc...
    
    http://www.ceannmusic.com/
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- Nastybutler77 (profile), 25 Feb 2010 @ 11:56am
  
  Re:
  "Heineken? Fuck that shit! Pabst Blue Ribbon!"
  
  You beat me to it! Damn...
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Brooks (profile), 25 Feb 2010 @ 11:59am

Meh
It clearly says "send no money". If and when they actually start collecting $5 from people, then *maybe* there's an issue here. Likely not even then, depending on structure.

If they were accepting actual money, and if they were promising partial ownership in return for that money, and if they didn't screen for "sophisticated investors" first, then there might be something to see here.
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Anonymous Coward, 25 Feb 2010 @ 12:35pm

Obligation?
Are people legally obligated to honor those "pledges"? If not, then I doubt this will "end up with people in court".
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C'mon, 25 Feb 2010 @ 3:05pm

You guys kidding?
It is brilliant.

Nothing more to it than signing up for a newsletter. No money. Sure it would be tough to collect all that money, but think this is smart and well done and how long is not last long? It has been ongoing since November 2009.

Go http://buyabeercompany.com Go!
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Valto, 25 Feb 2010 @ 11:58pm

The line
Crowdfunding in it's different forms for sure need some serious balancing act between, what can and can not be done. And when that model is taken even close to "investing" it gets even more difficult to find a workable model. I think in this case they should be ok.

All the rules in the world are man made and those are created to protect and to serve the people, not to limit innovation from happening. In worst case, some regulation can even create illusion of security where it may not be the case, like risk investing.

We believe strongly in the mega-trend of crowdsourcing and it's sub level of crowdfunding. So much that for the past two years or so we have taken the big challenge on making this available for web & mobile startups around the world.

Because of the Line Between Crowdfunding And An Illegal Securities Offer, we have developed a very unique community fund model to achieve our goal. Also overall transparency A very big part of the whole service.

For those interested to study this more, here some links:

Article in TechCrunch: http://eu.techcrunch.com/2010/02/15/grow-vc-launches-aiming-to-become-the-kiva-for-tech-startups/

Grow VC model in full detail: http://www.growvc.com/blog/2010/02/grow-vc-model-in-full-detail/
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yozoo, 26 Feb 2010 @ 6:51am

Good Joke
" it seems like the kind of joke that could end up with people in court."

The best ones always are!
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aries (profile), 26 Feb 2010 @ 11:52am

wow it is fun.
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stevef, 8 Mar 2010 @ 3:20pm

in repsone to the first paragraph: Countries like the UK are starting to accept crowdfunding proposals where the Crowd can buy "ownership" in a product or company. Trampoline Systems is an example... http://www.crowdfundingcentral.com
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