Legal Question in Securities Law in California

Re: IPO Over the Internet

This subject is fairly complex, and as with all securities-issue and -sale matters, the price of a mis-step can be civil or criminal penalties. So, proceed only with a RETAINED expert attorney.

With that caveat, here are the general ground rules.

Internet offerings are treated pretty much the same as any other securities offering made by any form of publicity. That is, registration is required unless you can safely rely upon an exemption from registration. Posting an offering on the Internet will probably count as solicitation, so only the exemptions that permit solicitation can be used.

Listing an offering on the Internet makes the offering visible in all states and most foreign countries. So far, this has not been held to violate the pre-registration laws of states in which the Internet listing clearly says no sales will be made to residents of states where the offering is not regustered, or words of similar effect. Therefore, if you want to sell, e.g., only to residents of California, compliance with U.S. and California registration or exemption law should be sufficient. The law may change and the exemption depends on the wording of the Net announcement, so be sure to get legal clearance for each and every posting!!!

There are some interesting new interstate small-offering exemption rules that may make self-underwritten multistate offerings easier and cheaper. You can contact me for details.

Finally, note that self-underwritten Web offerings have enjoyed limited sales success in the past. A few have done well. These are usually companies with a large mailing list of loyal customers for their products who also are willing to buy some stock. Selling stock to strangers has proven difficult on the Internet.