The tsunami has all but ended in a defeat for many investors and companies. There is finally good news for equity investors. The JOBS Act 3.0

The jobs act 1.0 and 2.0 delivered a disruption to investing and helped propel small businesses into multimillion-dollar companies.  The great rush of Reg. A and Reg. D and  Equity Crowdfunding seems to have all but halted in the last 2 years for many reasons. Since COVID more equity investors want to get out of the volatile Stock markets.

Companies were required to only allow investment form verified  Accredited Investors.  The SEC States An accredited investor is a person that the SEC deems is sophisticated enough to protect themselves in making investment decisions and therefore does not require certain additional protections under certain securities laws.  Currently, to be an accredited investor as an individual, you must (1) earn $200,000 (or $300,000 jointly with your spouse) in income over the last 2 years or (2) $1 million in net worth (excluding home value. There was a major downfall in this strategy, many eligible  Accredited Investors, especially in the US had not verified their status nor had they been given the right material to understand the investments criteria.

Start Up Companies were busy building and marketing their pitch decks and dealing with all the relevant road shows and right things to say. The companies themselves failed to deliver on then best strategy of all to entice investors, and exit strategy.

Indiegogo, Crowdfunder and Start Engine were co-conspirators in a race to entice companies to list on their platforms they did not divulge to the companies that the main strategy investors seek is exits to IPO, Mergers and  Buy Outs.

As with the ICO craze of 2016, many companies made money in marketing and investor relations and many investors did eventually invest only to be dismayed at the lack of forethought in these projects. Over 90% of the ICOs from 2016 are now gone with millions being lost across the board.

While, the JOBS Act gave investors a new avenue and helped companies to deliver an alternative investing vehicle, the accredited investors, were this time left holding the bag.  As more companies were being listed the pool of investors got smaller and less tolerant of mistakes.

In 2014 – 2016 every start up company was the “Uber of ” or was “disrupting some form of economy”, the vast majority of those companies too have run out of funds, or never reached market with their product, even after there was a sizable investment from the members of the equity crowdfunding platforms.

WHAT DOES JOBS ACT 3.0 MEAN FOR COMPANIES?

The JOBS Act 3.0 should be the game changer. This should finally open the doors to investment like never before allowing investors to be accredited by their experience rather than their wealth.

It is now on the companies themselves to deliver solid growth plans and solid ideas. They should have a good team on board who are more than just friends from school and college.  The companies need guidance by seasoned personnel, rather than giving titles out to anyone in the room based on their needs.

The lack of quality education on Equity Crowdfunding and investing is still astonishing in today’s digital age where many  16 year olds had Youtube channels devoted to Crypto.

WHAT IS IN THE FUTURE FOR JOBS ACT 3.0 AND INVESTORS

The JOBS Act 3.0 gives many updates and addendums to the previous 2 JOBS Acts.

The Launch of Venture Exchange is one of the more ambitious and lofty elements, this will no doubt lead to a rush venture exchanges  being brought to market.  It stands to reason, that companies with 10,000 shares should not be regulated equally to those with 10 million shares. The Act 3.0 would allow for the registration of “venture exchanges” with the SEC to provide a venue for small and emerging companies and offer a platform to trade their securities. It would also permit the trading of venture securities, which would apply to early stage companies whose shares are Regulation A+ securities, as well as listed companies whose shares are below the average daily trade volume. The creation of venture exchanges would help even the playing field such that small and startup companies could attract investors.

HOW WILL THE JOBS ACT 3.0 IMPACT COMPANIES

Private companies should be able to utilize some of the many relaxed rules including  the rules for filing confidential IPOs. The current rules permit “an emerging growth company” or any person authorized to act on its behalf file confidentially. The JOBS Act 3.0 proposes to change the wording to “an issuer” or any person authorized to act on its behalf. This would widen the pool of companies able to explore confidential filings.

JOBS ACT 3.0 EASING OF REGULATORY BURDENS

The fourth objective of JOBS Act 3.0 is to reduce the economic costs of going public by relaxing the requirements for companies to produce quarterly financial reports. On average, initial regulatory compliance costs more than $1 million in one-time costs associated with an IPO. The Act 3.0 directs the SEC to analyze the costs and benefits of quarterly reports and provide recommendations to Congress for decreasing costs, increasing transparency, and increasing efficiency of quarterly financial reporting. The aim is to allow smaller companies to delay various financial reporting requirements. These tactics would enable more companies to secure an IPO by allowing them to spread the cost over a longer period of time, thus reducing the financial burden of going public.

The Marijuana Industry should be rejoicing and hoping to capitalize on these relaxed regulations along with the recent victory and landmark legalization of marijuana in Illinois just last week. Marijuana, Cannabis and CBD companies now have better access to a larger pool of investors , with less regulation at a critical time for the Cannabis markets.

Accredited Investors can now come for a new class in the investor pool and be self directed. This will help deliver a huge influx of investors into the market and so long as companies have a clear path to exit and solid team this is a win for all.

EQUITY INVESTORS SHOULD START LINING UP THEIR PORTFOLIOS FOR 2020 AND BEYOND

The new acceptance of investment in Cannabis and Marijuana markets as legitimate, of not federally legal yet, is a huge boost for famers, growers and research scientists interested in releasing new medical treatments for Cancer, Addiction, Mood disorders and pain relief.

As more states legalize both in medical marijuana and recreational marijuana use, the older propaganda is not able to out do the merits and positive reports especially from the medical marijuana and CBD research camps.