How much can you say, part II
We wrote a couple of weeks ago about the increasing trend among companies and venture firms to announce their plans to raise private money via news stories, including at VentureWire. We asked a couple of well-known attorneys then whether this might infringe upon SEC rules that prohibit general solicitation, and they said the announcements appeared to do so -- though they were careful to add that each announcement needs to be looked at case by case.
We sat on this for a week or so, and then noticed a more notable spike in the number of such briefs at VentureWire during the slow days of Mon, Dec. 27th and Tues, Dec. 28th. There were a total of 11 stories about companies looking for money. One, Osel, of Santa Clara, even said it was giving up on venture capitalists and focusing on „individuals.š Osel, like a lot of other companies doing the announcing, is local, another reason we're interested in the trend.
Meanwhile, we finally heard back from Colin Breeze, at Breeze Venture Partners, who we reported about in the earlier post. He said he couldn't talk about his fund-raising, and that even when he is done, he'd have to consult with an attorney before he talked publicly.
We also asked Dow Jones (which owns VentureWire) about their editorial policy on running these announcements as stories. Competing publication Private Equity Week, we're told, has a policy of not running such announcements. This is the response we got from Bob Christie, spokesman at Dow Jones: "It's news when companies are raising money, and reports of such activities are not solicitations," he said, after checking with Dow Jones' lawyers.
Fair enough. Interestingly, though, Wilson Sonsini attorney Jonathan Axelrad tells us that such public announcements by companies or venture firms raising money might actually be good for individual investors. How? Because it gives those investors possible grounds to sue the company or venture capital fund if things turn south in the future -- on the basis that they were solicited for investments even though they didn't have the required sophistication to invest.
More on confusing announcements by private companies was carried in our Mercury News story today. We remain interested in what readers think about these issues. We had limited space in today's paper, but want to make sure we devote enough attention to this going forward.
UPDATE: We sought clarification from Private Equity Week about its policy, and editor Dan Primack says it's a bit more complicated than we suggested above. Apparently, PEW will run stories about companies or funds that are seeking money, when PEW finds out about it. Primack says his attorneys are confident that publications like Private Equity Week and VentureWire won't get sued for such stories. It is the companies or venture funds that have to worry. True, some of the announcements come from SEC filings by the companies, and so shouldn't be seen as solicitations, he noted. Primack said his attorneys draw the line at publishing phone numbers at the bottom of stories about fund-raising, along the lines of "venture company X is looking for $100 million, contact Joe Smith at the following phone number...." PEW won't provide the numbers, whereas VentureWire will, he said.