How do you screen target companies that are listed on the platform?
As a rule, we allow to list only shares of companies that have raised at least $50,000,000 and have sophisticated investors (venture backed, strategic investors etc.), which we view as a core competency. However, it is important for each investor to make his or her own educated decisions. In some cases, we may allow to list shares of companies that have not met these criteria if we recognize a reason that justifies such listing.
Is investing in the shares of private companies considered a solid, risk-free transaction?
Purchasing securities is an investment that involves risks and is not considered a solid investment. It requires the examination of the many various aspects of the investment, including financial, accounting, legal and tax liability issues, etc. Therefore, those interested in investing in securities should carefully consider, with the assistance of professional consultants on their behalf, all aspects of the purchase, including their own economic status, the volume of their assets, their earning ability, etc. While taking all of the aforementioned into account, they should consider their (and their family’s) ability to sustain any failure of the investment without it seriously affecting their own (and their family’s) lifestyle.
What limitations apply to the purchase of shares in a target company from their sellers?
Unlike the transfer of shares of a public company, there are always limitations on the transfer of shares of a private company. For example, the private company's Board of Directors is usually required to approve the transfer of shares; the other shareholders may have a right of first refusal to purchase the securities being offered, etc. Other limitations on the transfer of shares may apply as well.
What tax issues are involved in investing through the platform?
Investing in securities and purchasing or selling of tokens and shares involve tax obligations (including reporting obligations) for both the buyer and the seller. For example, employees wishing to sell stocks or options that were granted to them as part of an options' plan may be subject to special taxation treatment. We recommend that you consult with an accountant or a tax consultant regarding these issues, including the requirement to report the transaction to the tax authorities or to a trustee on behalf of the tax authorities.
What commission does The Elephant charge?
From the Seller: We collect a fee from the seller of the shares upon completion of the sale of the shares. The fee can be at a certain rate (currently 2.5% of the total consideration) or a specific amount. This may change from time to time.
From the Investors: We collect an annual management fee from the holders of Dedicated Tokens (currently at a rate of 1%). In addition, upon an Exit/IPO/dividend distribution arising from the shares of the Target Company held by the Dedicated Partnership, we collect a success fee (currently equal to 10% of the profits). This may change from time to time.
Is it necessary to consult with a lawyer/accountant?
We highly recommend that your investment or selling transaction be overseen by a lawyer/accountant or by any other relevant consultant on your behalf. The Elephant does not provide consultancy services of any kind to any of the parties.
Is a seller required to sell all of the shares held by him/her?
A securities seller may decide whether to sell all of his or her securities or only some of them in any transaction. At the same time, in order to preserve propriety of the securities-selling process, the Platform Operator will not allow a securities seller to publish simultaneously on the site two different sales offers for the same securities.
How do I sell shares in a private pre-IPO company?
Selling shares of private pre-IPO companies can be challenging. To complete a transaction, you must find a buyer, negotiate price, execute legal agreements and process the transaction with the company. Applicable securities laws must also be understood and navigated. The Elephant helps buyers and sellers execute each of these steps.
Will the issuer of my shares permit the sale?
Generally private companies are supportive of their shareholders finding liquidity. They do, however, have a number of valid concerns regarding such stock sales. These include sensitivity to disclosure of financial information; the impact secondary sales may have on their option pricing and/or valuation of the company and compliance with securities laws. Each issuer has different policies and processes in place to address these concerns. For example, almost all issuers impose a right of first refusal on secondary stock sales and many require the prior approval of the board of directors. Your private securities specialist will help you navigate your relationship with the company and compliance with their preferred transaction process.
Do I need a broker to help with my sale?
No - there is certainly no legal requirement that you use a broker to sell private company shares. Many sellers, however, find that leveraging a broker and a private market platform like The Elephant provides several advantages. These include a large network of potential buyers, experience with private company transfer processes, knowledge of applicable securities laws and transaction documents and the expertise to bring these elements together in a successful transaction.
Is there a minimum value of the shares that I can list of the Platform?
The minimum value of shares that you can list on the Platform is $100,000. We aggregate the shares of Target Companies listed on the Platform and once we reach a minimum of $1,000,000 of a Target Company’s shares in total, we will commence a Dedicated Token Offering.
What is a PEC token?
A PEC is an ERC20 (https://en.wikipedia.org/wiki/ERC20) compatible token. PEC Holders (and them only) will be entitled to participate in future Dedicated Token Offerings on The Elephant Secondary Platform and to receive a portion of the Platform revenues.
Which digital wallet can be used on the platform?
In order to hold the PEC or Dedicated Tokens, you must own a The Elephant Platform Wallet. This wallet is only available to Accredited/Qualified Investors that have completed their Accredited/Qualified Investor verification process and are whitelisted.
What KYC (Know Your Client) procedures do I need to go through to be verified as an Accredited/Qualified investor?
In order to qualify as an Accredited/Qualified Investor and to be whitelisted on the Platform, you need to provide the necessary information and documents in accordance with the rules and regulations applicable in your country of residency.
What is the difference between utility token to security tokens?
Unlike utility tokens which only grant you access to a particular service, security tokens can be backed by real assets and grant voting or participation rights in profits.
How do PEC and Dedicated Tokens meet regulatory requirements?
In order for an investor to purchase a security token he or she must go through the Know Your Client (KYC) and accreditation process, to our full satisfaction in accordance with applicable laws.
How do I participate in Dedicated Token Offerings and purchase Dedicated Tokens?
Once you are verified as an Accredited/Qualified Investor on the Platform. You are able to purchase and hold PECs. PEC Holders will receive notifications when Dedicated Token Offerings are launched and Dedicated Tokens may be purchased. The exact terms of the Dedicated Token Offerings will be detailed in the notification. After the Dedicated Token Offerings, Dedicated Tokens may be purchased by Accredited/Qualified Investors from their holders either through the Platform, the liquidity reserve or exchanges.
How can I sell Security Tokens?
Depending on the regulatory requirements applicable to certain investors, securities may need to be locked up for a period after the initial issuance. However, once the token is freely tradeable it will be transferrable either through the Platform or through a liquidity reserve. It is also possible that the security token be listed on certain exchanges that enable trading of security tokens allowing for global liquidity 24/7 365 days a year with instant settlement times. Please note that currently there are no such operating exchanges. Both the PEC and the Dedicated Tokens are security tokens, and this applies to them.
What do I own when buying a Dedicated Token?
When buying a Dedicated Token, you own participation rights in the dedicated limited partnership that purchases the private company shares. As a Dedicated Token Holder, you will have the right to receive distributions that arise from the shares upon an Exit/IPO/dividend distribution of the company whose shares are held by the dedicated partnership. After the sale of the shares and distributions of the funds to the Dedicated Token Holders, the Dedicated Tokens are burnt.
What currencies/cryptocurrencies can I use to buy PECs?
USD, EUR, BTC and ETH.
What currencies can I use to buy Dedicated Tokens?
USD. Additional currencies may be accepted in specific Dedicated Token Offerings on a case by case basis. The list of currencies that are accepted will be included in each notice of a Dedicated Token Offering.
When does a Dedicated Token Offering become binding on the investor?
When a PEC Holder notifies the Platform Operator that it elects to participate in a Dedicated Token Offering, it is binding on him or her, however it is subject to the shares actually being purchased by the Dedicated Partnership.
What is a Dedicated Token?
A Dedicated Token is an ERC20 compatible token which represents an equity/asset, more specifically a participation unit in a limited partnership that holds assets such as shares.
What are the requirements to be considered an accredited/qualified investor?
The rules are determined by the applicable regulation, according to the specific investor’s place of residence.