The Fine Line Between Crowdfunding & An Illegal Securities Offering Part II: SEC Fines Ad Execs Over Pabst Stunt

from the saw-that-one-coming dept

Way back in February of 2010, we talked about some ad execs who had set up a website, BuyaBeerCompany.com, asking people to help crowdfund the $300 million it was expected it would take to buy Pabst Brewing, Kickstarter-style (i.e., make pledges, with different "rewards" based on pledge amount, and pledges only due if the total amount raised). While there was some press about this publicity stunt at the time, I believe I was the only one who pointed out that this whole thing almost certainly ran afoul of SEC guidelines on selling securities -- even if it was a stunt. Apparently, the SEC agreed. It only took 16 months, but Davis Freeberg alerts us to the news that the SEC went after the ad execs, and they've now "settled."

From the description from the SEC, it sounds like no money changed hands here. It's just that these guys agreed to "cease" making such offerings. I'm assuming that the SEC spotted this independently of me bringing it up, but if I brought it to their attention, sorry guys. I can definitely see the reasoning behind the SEC getting involved here, as there's certainly a reasonable risk of fraud on some random website offering people an opportunity to buy a company. However, the internet has certainly opened up new ways to raise money -- such as via crowdfunding. While most crowdfunding offerings don't involve an "ownership" stake, and thus no equity that the SEC might be concerned about, it does make you wonder if the tight regulation from the SEC over such matters might squeeze out some interesting, and entirely legitimate opportunities.

Filed Under: crowdsourcing, ipo, pabst, sec
Companies: pabst brewing

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

from the this-won't-last dept

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.

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