Trying to figure
out how many investors might want to fund your small business? Go ahead and
tweet about it.
Startups are now
able to post a Twitter message about their stock or debt offering to gauge
interest among potential investors, the U.S. Securities and Exchange Commission
said this week. The announcement continues the SEC’s trend of warming up to
social media, which began two years ago when it approved the use of posts on Facebook and
Twitter to communicate corporate announcements such as earnings.
“It’s a brave new
world,” said Joe Wallin, a Seattle-based attorney who advises startups at
Carney Badley Spellman. “The way securities have been distributed and sold has
never involved a lot of media.”
The SEC’s latest
endorsement of social media only applies to companies looking to raise as much
as $50 million a year. New small-business fundraising rules were approved in
March, which increased the limit for capital raised to $50 million from $5
million to enjoy the perk of fewer required disclosures. The changes were
required under the 2012 Jumpstart Our Business Startups Act, which deregulated
fundraising rules for small businesses.
Firms that use
Twitter to solicit investor interest must include a link to a required
disclaimer that says the firm isn’t yet selling securities, the SEC said in
this week’s announcement.
It’s not clear how
many companies will take advantage of the higher fundraising cap. Fewer than 30
offerings were made from 2012 to 2014, when the limit was $5 million, according
to the SEC.
The SEC said in
April 2013 that companies could use Twitter or Facebook to make big
announcements as long as investors were told in advance to look there. The
SEC’s decision was prompted by Netflix Inc. Chief Executive Officer Reed Hastings,
who posted information about his company’s monthly viewers on his Facebook page
rather than in an SEC filing.
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