After reflecting on the event at Crowdfund Texas, I have come to the firm belief that the upcoming IPO(s) from IPO Village will encourage movement on the rules that will ultimately govern equity crowdfunding. Equity Crowdfunding will bring about a new asset class that will have its own rules and regs from both the SEC and FINRA. The Direct to Public Offerings (DPO) being presented on IPO Village are a natural intermediate step to this new asset class. Unlike the traditional definition of equity crowdfunding, the offerings shown on IPO Village are not private equity offerings. They are in fact companies that are going to be publicly traded and include all the benefits that come with that status. Two of the benefits from the perspective of the investing crowd are the facts that these companies will have filed S-1′s that have been approved by the SEC (standard investor protection as exists under 1933 securities law) and an established secondary market (The issues stock will trade on the OTC market).
This actually resolves two of the biggest concerns surrounding equity crowdfunding, the first of course is the disclosure (investor protection) being offered by companies seeking to acquire capital through equity crowdfunding, the second being, once you own a piece of a privately held company how do you liquidate the holding. There will ultimately be a secondary market for equity crowdfunded offerings, the question is when. Under the JOBS act you are required by law to hold that investment for a minimum of one year, this is not the case with a public offering.
Read the rest at the IPO Village blog