Securities and Exchange Commission Will Allow Companies To Raise Money Via Twitter

Securities and Exchange Commission Will Allow Companies To Raise Money Via Twitter

The U.S. Securities and Exchange Commission’s (SEC) social media phobia appears to be letting up as news emerged this week it will allow startups looking to raise up to $50 million to post tweets about their offerings. Previously companies had been restricted to specially prepared offer memorandums as the only way to court potential investors.

The SEC was slow to adapt to social media as it was only two years ago that it approved the use of Facebook and Twitter posts for corporate announcements like earnings and this had virtually been forced when Netflix Inc began to use Facebook to promote viewer numbers rather than using SEC filings to do so..

In March of 2012 SEC gave permission smaller businesses looking to raise just $5 million to use Twitter and has now upped the ante to $50 million under the Jumpstart Our Business Startups Act of 2012.

Seattle-based attorney Joe Wallin, a Carney Badley Spellman consultant for startups, described the latest SEC social media as a “a brave new world:.

“The way securities have been distributed and sold has never involved a lot of media,” he said ”
Under the SEC’s latest Twitter concessions, financial companies that tweet to sees investor interest have to include a link to a disclaimer stating the company isn’t selling securities as yet.

Financial commentators say it isn’t clear how many firms will take up the higher fundraising offer cap, but interest will likely be strong as the change comes right at the same time the SEC will allow crowdfunded equity raises.

Between 2012 and 2014 when the limit was $5 million, less that 30 offerings were made.

Stay Connected