Weekly Update #187: When Pre-IPO becomes IPO
Feb 21st, 2017
When Pre-IPO becomes IPO
Some EquityZen 101 for you this week. Last Friday, app platform company MuleSoft filed for an IPO, taking a bit of attention - rightfully so, depending on who you ask - away from Snap(chat)'s impending public offering. We felt this would be a good time to remind investors about the relation between pre-IPO investing via secondary markets and IPOs (Necessary disclaimer: Not all companies available for investment will exit via IPO or acquisition; IPO or acquisition does not guarantee a return on investment).
Lock-ups and Transfer Restrictions
When a company files a Form S-1 Registration Statement with the SEC, for all intents and purposes, it is preparing a public offering. Existing pre-IPO shareholders enter into agreements that make their shares subject to a lock-up (typically 180 days) from the IPO date. For EquityZen and pre-IPO investors, this means:
- It becomes no longer possible to conduct company-approved secondary transactions of private stock via share transfers
- Any shares already held by EquityZen typically cannot be transferred to investors until after 180 days following the IPO
Can I invest through an Entity or IRA?
Finally, a refresher on a common question we get, especially at this time of year when investors are making decisions about personal finances during tax season. Last week, we wrote about individual investors forming investment LLCs to make private investments. We've previously written on our blog about investing in alternatives through your self-directed IRA. The answer to "Can I invest through an Entity or IRA" is most certainly YES and YES. Before you do, create a profile for your entity or IRA by following these simple steps:
- Visit your My Investments page
- Click "My Profile" and then "Add New Profile"
- Select "Entity" or "Self-directed IRA" under the Entity Type
- Fill in the name of the entity (from the formation documents) or IRA (from your custodian's statement) and the other requested information
Once you save the profile, you can toggle between your profiles from the dropdown menu on the upper-right corner of our website.
Kaylock Yam, CAIA | Distribution Lead | EquityZen