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  • What to expect when a startup you invested in has an IPO

    Posted by Brian on September 29, 2022 at 9:30 am

    Recently, one of my earliest (and first ever crowdfunding!) investments from 2018 went public on the NASDAQ – Atlis Motor Vehicles (ticker: AMV).

    This is my second or third IPO (this one technically went public through a Reg A Direct Public Offering, so not by filing an S-1 and having a traditional “IPO”) – and the process has not been smooth yet in any of them.

    Here are a few things to keep in mind when a startup investment of yours goes public, and some of my experiences thus far in the hopes of setting expectations for other investors.

    1. Whether or not you can sell your early investor shares will first be impacted by whether the company registered your class of securities or not with the SEC. e.g. In the current offering, Atlis registered the Reg A securities to be freely traded, but there are still restrictions on Reg CF and Reg D securities from earlier rounds, so those can’t yet be traded. Refer to Rule 144 around other lockup periods and restrictions around certain types of stock.
    2. When your shares are held at an SEC-registered Transfer Agent (like KoreConX, Securitize, VStock Transfer, AST Financial, etc.), some may let you sell directly from the TA itself where your shares are; but other times you will have to transfer your DRS (Direct Registration System) shares out to your brokerage account (e.g. TD Ameritrade, Fidelity, Merrill Edge) before you can trade them
    3. There may also be special lockup periods on certain classes of securities or lockup periods on Directors’ and other Executives’ shares
    4. Getting your account setup and shares able to be traded will depend on accurate information on file (SSN, address, etc.) – so you should pay very close attention to your emails once a company begins talking about listing either via IPO or Reg A DPO
    5. Lesson learned: NEVER unsubscribe from mailing lists for your investments! Even if it looks like it’s the “Marketing List” and might sometimes be spammy. I personally did this with Atlis – I was on all their mailing lists except for the “Marketing List”, and apparently that’s the one they chose to send these critical investor emails to about the public offering – so I never received these emails telling me about all these crucial instructions (and only heard about them going public from other investors).

    Long story short – don’t expect to be able to trade any shares within the first week (or more) of a crowdfunding company going public – it’s often a long process and still isn’t very streamlined.

    Hopefully the process will improve over time so that startup investors can have a more seamless transition to liquidity and the public markets.

    • This discussion was modified 1 year, 8 months ago by  Brian.
    Brian replied 1 year, 8 months ago 1 Member · 0 Replies
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