Since the Securities and Exchange Commission (SEC) established rules that
now allow individual investors to become involved with securities-based
crowdfunding in May of 2016, a number of issuers have begun to offer what
they call Simple Agreement for Future Equity (SAFE). Despite the name,
the SEC notes that this new type of security is neither “safe”
nor “simple” in some situations. Understanding the terms of
these investments is a key part of keeping your money safe, so here are
five key things to keep in mind about these offerings.
These are not common stocks. When buying common stock, you purchase an ownership stake in that company
and are entitled to certain rights guaranteed by federal securities law
and state corporate law. These types of investments do not give you that
ownership stake – instead, certain terms need to be met in order
for you to receive any shares.
Not all SAFEs are created equal. SAFEs offered by different companies may use different terms to describe
the events that would trigger your investment, and the conversion price
and provisions concerning conversion may vary between issuers. Before
you commit any of your hard-earned dollars to this investment, make sure
that you read and understand all terms set forth in the agreement.
Understand the conversion triggers of your SAFE investment. Before you invest, you need to know which scenarios act as a trigger.
Some examples include the company’s initial public offering and
a merger with another company or companies. If these triggering events
occur, like the sale of the company or an additional round of financing,
then you will receive the shares you invested in. However, if these triggering
events never occur, then you may lose some or all of your investment.
If you are looking to hire an experienced investment fraud attorney to
handle your case, contact our team at Meyer Wilson today. With nearly
20 years of experience and more than $350 million recovered in settlements
and verdicts, we have the track record of success and knowledge you need
to feel confident moving forwards. Call us to speak with a member of our
firm today, or
fill out our online form to start out with a free case evaluation.