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Comment by joshlemer | Hacker News Reader

>prevents the small investors from selling or transferring their shares

You can never sell or transfer your shares? Then why would you ever invest?

Before the company is publicly listed, the crowdfunding shareholders can only sell (and must sell) when the Board tells them to -- in an acquisition or merger, in other words.

This type of clause often exists in shareholders' agreements between founders as well, to prevent one founder from selling a substantial part of the company to a party the others might not approve of.

If these are Regulation A+ offerings, which they must be to sell to unaccreddited investors, then shares are free to trade on secondary markets after the offering closes. These companies may even list on OTC exchange. Here's a good slide deck on it: https://www.sec.gov/info/smallbus/acsec-071916-otc-zinn-reg-...

I'm not familiar with US regulations at all, and I wouldn't pretend to give any advice about that. The information I posted about the agreements used by Invesdor is only pertinent to the Nordic markets in which they operate (Finland and Sweden). Sorry if that wasn't clear, and thanks for the info!

Dividends. I think that system (reward investors for funding profitable companies) was healthier than today where shares exist only to be flipped and prices have no connection to performance other than speculators' psychology.

Because they don't read them and even if they did they wouldn't understand them. All of that is moot anyway since any reasonably informed investor would realize these type of non-voting shares with essentially no board representation are going to get diluted into oblivion in later funding rounds anyway.

It's almost impossible to profit as a shareholder via crowd funding even if the company is wildly successful as it stands currently. Hopefully in the future the markets or legislation will adjust this once that becomes more clear to the general public.

I assume the GP meant something similar to restricted stock, where you are severely limited in selling and transferring of your stock until certain preconditions are met (change of ownership, IPO, etc).

Privately-held stock, i.e. restricted stock of non-reporting companies, can't be sold "to the public" and generally must held for at least one year [1], but other than that is quite transferable pre-IPO. That minimum holding time can vary, too, depending on circumstances. Most transfer restrictions are put in place by companies, not law.

[1] https://www.sec.gov/investor/pubs/rule144.htm

As far as the SEC is concerned you are correct, but it's possible to have additional (contractual) restrictions placed on a stock grant.

It's not legal to go out and raise a bunch of money from unaccredited investors. Companies will most likely have to get approved for Regulation A+ by the SEC before Indiegogo agrees to sell ownership, in which case the shares are transferable once the offering is closed.

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