UPDATE JUNE 2017
We expect to have a solution for residents of the four states soon! Please sign up on the list at the end of the is blog post to receive an alert once that solution is available!
UPDATE APRIL 1, 2017
We've received a number of requests from people in the 4 states asking if they can have a friend or relative who lives outside the 4 states buy shares and then sell them across state lines. We asked our securities lawyer and this is her response:
There are no restrictions on transfer of the Reg A+ shares, so there's no fundamental issue with one person selling shares to another person. However, anybody selling shares needs to be mindful of state securities law.
We have confirmed that one-off, person-to-person sales of securities are permitted by all four states. However, these really do have to be one-off or “isolated” transactions. Selling to more than one person might mean you are acting as an unregistered broker or dealer, which is a felony in some states.
Legion M should not give additional guidance with respect to secondary trading. I suggest that anyone who thinks they have a clever idea should talk to their own securities lawyer. The laws are different in every state, so I can't comment on any particular situation without reviewing all the details.
WHY CAN’T I BUY SHARES IN MY STATE?
The short answer is that the JOBS act is relatively new, and this is an unfortunate growing pain that hasn’t been resolved yet.
The long answer is that the Regulation A+ exemption we’re using for our current offering allows us to sell securities in all 50 states. However, four of those states have additional state-level laws that cause a conflict. Texas, Florida, Arizona, and North Dakota require an issuer to sell their securities through a broker-dealer. The other 46 states do not.
For most companies this isn’t much of a problem. After all, broker-dealers are the way most companies raise money. These are the guys that “dial for dollars”, calling on networks of high net-worth individuals to sell them private company stock. They charge an up-front fee, plus a percentage of every transaction. The more they raise, the more they get. Most companies are fine paying these fees—it’s just the cost of doing business.
Legion M isn’t like most companies. Our whole purpose is to go directly to the public, and build a company owned by the fans. For us, a broker-dealer represents a middleman between us and our shareholders, adding a whole layer of fees (likely costing us millions of dollars) and complexity for us and our shareholders. The idea of using commissioned salespeople (whose livelihood is dependent upon how much stock they can sell you) is completely contrary to the way we deal with our members and investors.
We spent MONTHS trying to find a broker/dealer that could work with us, but came up short. Ultimately, we decided we needed a different solution.
ARE THERE OTHER PLACES I CAN BUY SHARES IN LEGION M?
Yes, although it may require some work and/or patience on your part.
Just to be clear, there is no issue with you BUYING or OWNING shares in Legion M. We just can’t sell them to you as part of our Regulation A+ offering. However, there are a number of other ways you may be able to acquire shares that are perfectly legal.
Buying from another shareholder
Shares in our Regulation A+ offering can be resold without restriction (once we have our first closing later this year), and shares from our Regulation CF offering will be able to be resold after the lockup expires later this year. If you find someone who owns shares and wants to sell them, you can purchase directly from them. Think of it like buying a used car--you’ll need to find a seller, negotiate a deal, and figure out how you want to exchange the money for the shares. If you have any questions about the process we’d be happy to answer them, but we’re not allowed to connect you with sellers. Our recommendation is to connect with friends or other members of the Legion M community. You could also look at markets like Craigslist or eBay. As with anything, beware of scammers, and please read our Guide to Buying, Selling, and Transferring Shares. If you have any questions, feel free to reach out to email@example.com. NOTE THAT THIS OPTION WILL ONLY BE AVAILABLE AFTER WE'VE HAD OUR FIRST CLOSING ON WEFUNDER.
Buying on a secondary market
Equity crowdfunding is brand new, but we expect that secondary markets designed specifically for Regulation A+ and CF stock will come online later this year. There are none we are aware of at the moment, but if you sign up below, we’ll send you an e-mail a notification if/when that changes.
Buying as an accredited investor
If you are an accredited investor, you may be able to purchase shares directly from Legion M via a Regulation D offering. As of this writing, we have not opened a Reg D round, but if there is enough interest we will consider it. If this is of interest to you, please sign up on the list below.
Just because we can’t offer shares directly to you now doesn’t mean we never will. In fact, we're working hard to find a solution. For example, it’s possible we could find a suitable broker-dealer, and amend our current offering. We could also potentially open a Regulation CF offering later this year (it must be at least 1 year after the closing of our last Regulation CF round).
We’re very sorry about this issue. We fought HARD to figure out a way to accommodate all 50 states in the Regulation A+. We’ll continue to do everything in our power to make Legion M open to all. If you have any questions, please send them to firstname.lastname@example.org.