25 Jun Using Twitter for “Testing the Waters”
Perhaps one of the biggest boons to the new Regulation A+ crowdfunding laws is the ability to test the waters. Before incurring the huge cost of performing your offering circular, you can “test the waters” or “gauge the temperature” of investors and potential investors by simply asking whether or not investors would desire to invest in your deal. It’s a huge cost/time saver when it comes to determining whether a Reg A+ offering is even a good idea in the first place.
As of yesterday, the SEC also released some additional clarity for “testing the waters.” The good news is that Twitter can be used as a tool for testing the waters of your Reg A+ offering before you file your Form 1-A and take your deal to market. There are, of course, some stipulations, including:
- The communication should include an active hyperlink to the Rule 255 required disclosure statements.
- The communication should also–“where possible”– convey the importance of the introductory language included in the included Rule 255 disclosure hyperlink.
It’s interesting because the law original asks that the disclosure “prominently convey” the hyperlink as well as the necessary disclosure. It would seem the brevity of Twitter has allowed for a bit of a “pass” here when it comes to the ability to provide complete disclosure. Of course, it’s always best to err on the side of caution, especially when performing this type of outreach.
I’m sure Twitter will be used, but it will be interesting to see just how well it is done. There are very few individuals and corporations that have a large enough network on Twitter (individually at least) to garner mass acceptance in a testing-the-waters campaign. We’ll have to see how it all plays out. My guess is that Twitter will play a very small role, except for Reg A+ offerings performed by well-known Twitter moguls.