The CEO and Founder of BANQ said he understands the excitement surrounding aspects of the JOBS Act, but cautions those pondering a mini-IPO need to consider all of the impacts or they risk damaging their prospects over the long term.
BANQ CEO and Founder Mark Elenowitz is a featured speaker at FinFair 2015 taking place on July 29 at the IBM Innovation Center in Manhattan. FinFair 2015 brings together the people shaping both Wall Street and the crowd-centric retail alternatives market.
BANQ is a division of TriPoint Global Equities, a full-service investment bank which specializes in financings and advisory services for growth companies, including public equity, institutional private placements, mergers and acquisitions and corporate finance.
Mr. Elenowitz said BANQ – launched this spring – will improve the ability of accredited investors to connect with growth companies and alternative investment opportunities. It will also feature IPOs, Regulation A+ offerings, secondary offerings and PIPES.
Initial investor reaction has been positive.
“We can process as many as two million accounts each week,” Mr. Elenowitz said.
The combination of the advent of the JOBS Act with the growing ability of investors to use the internet to both identify and research opportunities made now the perfect time to launch BANQ, Mr. Elenowitz said.
Thus he understands the excitement surrounding the JOBS Act, but he also suggests caution, especially concerning Title III, which he sees as flawed.
“It’s a disaster waiting to happen.”
Mr. Elenowitz explained some platforms may not be licensed to execute transactions. They must also be licensed to receive fees. Failure to be properly licensed leaves them open to sanctions and liability.
As a FINRA member, BANQ is properly insured and because they are a registered broker dealer, investors can be more confident of the opportunities they sponsor, he added.
Given the novelty of the many online investment opportunities available, Mr. Elenowitz believes transparency will be very important, as it will allow investors to properly vet platforms they are considering. BANQ provides that transparency by offering their securities through TriPoint, which provides liquidity for the successful public offerings taking place on BANQ.
This is an important development for regular investors because they seldom have access to the most desirable IPOs which get snatched up by institutional investors, he explained, citing the recent GoPro IPO as an example.
“A wide range of accredited and public investors can now participate in opportunities which were previously unavailable to them,” Mr. Elenowitz said. “It levels the playing field.”
That playing field is further equalized by providing investors with easy access to important information about companies through fully secured and encrypted data rooms, Mr. Elenowitz said.
“The data rooms are an interactive experience,” Mr. Elenowitz said. “We give them the same information that goes into the private placement agreements.”
“That is the same information the institutions have always had.”
Investors can also get a virtual tour of the companies they are considering an investment with.
“An investor in Iowa can conduct better due diligence on a company in Florida,” he said.
Regular webcast events allow investors to can post questions and request information from officials, Mr. Elenowitz added.
When the investor decides to sell an investment, they place the order and it gets executed, he explained. Tax information, confirmations and reporting documents are easily accessible online. Information addition is immediate through digital book entry.
“Other service professionals can execute a Regulation A transaction,” Mr. Elenowitz said. “In such cases investors receive a certificate. With BANQ the certificate is digitized so there are no deposit issues.”
The opportunity to conduct small cap IPOs through Regulation A+ allows companies to provide a fully registered offering to non-accredited investors without complying with state blue sky regulations, but there are many other areas investors need to be knowledgeable in, Mr. Elenowitz advises.
“How are trades executed? What access do you have to secondary markets?”
Mr. Elenowitz explained broker dealers play an important gatekeeper role, where they can use their experience to detect fraud. They are required by FINRA regulatory notice 09-05 to ensure compliance with all laws while participating in unregistered resales of restricted securities. They are required to take reasonable action if they notice “red flags” which may indicate an illegal, unregistered restricted security resales, with an example being when a customer physically deposits certificates or transfers in large blocks of securities from unknown sources.
A Sponsored Direct Offering (SDO) is BANQ’s small cap IPO process. After registering with the SEC and assuming they are compliant with state blue sky laws, a company call sell shares through an SDO. Usually after 180 days the company will be a fully-reporting issuer with the SEC and will trade on NASDAQ, NYSE MKT, OTCQB or OTCQX.
Mr. Elenowitz said an SDO offers some key advantages to small and medium sized companies. It provides them with a cost-effective way to go public without the traditional underwriting fees, costs and negative issues which often arise with reverse mergers.
An SDO also helps them avoid new NYSE and NASDAQ seasoning rules, Mr. Elenowitz said. These rules require companies becoming public through a reverse merger to complete a one-year “seasoning period” in a U.S.-based over-the-counter market before uplisting. Through BANQ, qualified companies can graduate to a senior exchange within a shorter time frame.
Clients who want either want to go public or conduct secondary offerings by raising funds themselves without paying full investment banker fees can employ the TriPoint Sponsored Direct Offering Mr. Elenowitz said.
A key feature of the TriPoint SDO is that BANQ helps the company follow the proper procedures right from the beginning so they do not make mistakes which later prove to be fatal. All services the company will need to later go public are completed by BANQ through access to professionals, service partners and vendors, he added.
Investors in a TriPoint SDO can deposit their stock certificates and trade their securities with BANQ.
BANQ also allows other broker dealers to list opportunities on the site, so investors have a wider range of investment opportunities, Mr. Elenowitz said.
Mr. Elenowitz said Regulation A+ offerings are well suited to companies with established affinity groups whose users often become brand ambassadors through personal interaction and social media posts.
“It is like Tupperware. You believe in the product, then you become a shareholder and then a marketer.”
Mr. Elenowitz said 24 years of experiencing the pitfalls of the industry has prepared him to guide companies through the offering process.
“Smart guys are the ones who have learned from mistakes. I will tell people what they need to hear.”