Bulldog Investments

There’s this thing called the JOBS Act that would basically make it easier for small or smallish companies to raise money by giving investors unaudited financials or not having internal controls or just lying to them on the Internet, which is my racket. I’ve enjoyed reading people really ripping into it*, like Simon Johnson, whose take seems to be canonical, or Yves Smith, whose take is good too but I prefer “Just Open Bucket Shops Act**” to her “Jumpstart Obama’s Bucket Shops Act” if we need a sarcastic acronym and, yeah, I suppose we do.

I mostly agree with the ripping, because, like I’ve said before, either the SEC registration process is necessary to protect investors, in which case it’s especially necessary for smaller newer companies, or it’s not, in which case it’s no more necessary for large companies than for small ones. So fine. But the JOBS Act crowdbuzzwording mania is definitely timely, what with Kickstarter being a thing and the Facebook IPO being the hugest thing in the history of things and also something where people apparently talked about offering shares of Facebook on Facebook because synergies. Anyway it seems likely to me that the widespread desire to loosen securities laws is not driven solely by the desire of businesses to raise capital – since, among other things, as Yves Smith says, crowdmuppeting is a super dumb way to raise capital, and actually come to think of it so are IPOs, kind of – but also by the desire of people who are not quite private equity magnates to get their hot little hands on some shares in their favorite social doodad.

As it stands now, not only can the non-rich not buy shares in Facebook unless they (a) are “accredited investors” ($1mm assets or $200k in income) and willing to get sort of ripped off or (b) just, like, wait a few weeks, but non-accredited investors are also not allowed to even hear about exciting investing opportunities from private companies looking to sell securities. Because it’s illegal to sell unregistered securities***, even if you only sell them to rich people, if you’ve made a “general solicitation” – that is, basically, if you’ve talked about them in pleasing ways to non-rich people. This is why Bridgewater doesn’t advertise on TV, and why no matter how much you want them you can’t get Whitney Tilson’s market insights unless you are an accredited investor on his mailing list, or a Dealbreaker reader, or a human. Read more »