When the Green Bay Packers set out to raise money by selling stock to the public late last year, it was the sixth time since 1924 that management had given fans a chance to own some of the team. But it was the team’s first time doing the stock sale entirely online, with a Shopify-like cloud store that allowed them to manage the campaign themselves.
“How would they have done this without” this online store? said Mat Goldstein, CSO and co-founder of the company whose platform the Packers used, DealMaker. “They would have done it the same way they did in the 1920s, 1940s and 1960s. People would have had to mail purchase orders, send checks, and a CFO and an army of accountants would have had to use a spreadsheet to track what happened and match the payment to the purchase order, if the buyer information was filled in correctly. So you can just imagine the limitation of what companies could have done without software.
DealMaker was launched in 2015 to enable businesses to raise retail funds online under liberalized securities rules enacted in the Jumpstart Our Business Startups (JOBS) Act of 2012.
The law eased reporting, oversight and outreach rules for companies trying to raise money from investors and created a pathway for companies to use crowdfunding and other sales processes retail to generate capital from non-accredited investors.
“Whether it’s people buying NFTs or ConstitutionDAO, raising capital at retail is part of a phenomenon that captures people’s hearts and minds,” said Rebecca Kacaba, CEO of DealMaker. ConstitutionDAO is an online movement that leveraged crowdfunding to bid on one of the original copies of the US Constitution.
The JOBS Act creates three avenues for raising capital directly from investors.
Reg. D 506(c) allows companies to sell shares to a targeted and accredited group of investors, Reg. CF allows them to raise capital from unaccredited individual investors, usually limited to a few million dollars from each investor, and Reg. A+ allows them to offer tens of millions of shares each year without having to meet the full registration requirements imposed by the Securities and Exchange Commission.
“We make bids over $100 million all the time,” Kacaba said. Structuring an online platform around the 2012 law has “really opened the door for retail to become a vehicle for meaningful fundraising”.
The Packers’ raise, which grossed about $65 million before its February close, sold just under 200,000 shares in about 175,000 trades at $300 per share plus a $35 processing fee. Investors from all 50 states, US territories and Canada participated.
The stock sale was similar to other retail capital raises, but with significant differences, in part because the Packers are structured as a not-for-profit organization and the shares come with strict limits that make them more of a collectible than a chance to make money. Among other things, investors are limited to 200 shares, no dividends are paid, and although shares can be given to family members, they cannot be sold. The main benefit of ownership is the right to vote for the team’s board of directors.
“Anyone considering buying Packers stock should not buy the stock to make a profit or to receive a dividend or tax deduction or other economic benefit,” the Packers said in their public disclosure of the sale.
Just before the shares went on sale in November, Justin Salazar of Rio Hondo, Texas, told USA Today that he planned to buy a stock as a gift for his father. “I’ve been a Green Bay Packers fan since I was a kid because of my dad’s love for the Packers,” he said.
The team is using the money to modernize the concourse at Lambeau Stadium, which dates from 1957 and is the oldest stadium in the National Football League, and to update its video scoreboard. The upgrades are expected to cost around $250 million.
Under NFL rules, money raised from stock sales is limited to stadium projects that benefit fans.
The team’s first stock sale, in 1923, took place four years after the team’s inception and was intended to help it avoid bankruptcy after a difficult financial start. Since then, there have been stock sales in 1935, 1950, 1997 and 2011.
The main advantage of the online platform is the real-time back-office processing of stock sales. Investors open an account in the online store, select the number of shares they wish to buy, enter their card number and the software takes care of the rest while giving the company immediate visibility into transactions.
“It used to be that you called the lawyer or called the accountant and the CFO would have a big spreadsheet on his desk or a stack of paper and now we’re putting it all in the online store,” Goldstein said. “You know in real time how many buyers have entered the portal, how many have paid for their order, which payments have cleared the banking system and if there have been any chargebacks or reversals. All purchase history is available online in real time, and you can run analytics on a campaign with a single click.”
Companies still have to raise capital on their own, which can be easy for a high-profile organization like the Packers, but can be a challenge for lesser-known companies.
“You still have to find your investors,” Goldtstein said. “You always have to explain the company’s value proposition to them.”
This usually involves hiring outside advisors, especially if it’s a 506(c) capital raise involving accredited investors.
Where the platform makes a difference, executives said, apart from the administrative simplicity it offers, is in reporting; it automatically generates reports compliant with the JOBS law, which can facilitate disclosures and facilitate auditing.
“Technology allows you to close investors so that you can do a proper audit,” Kacaba said. “An accounting firm will have a very detailed reconciliation of who bought shares at exactly what price and what the payment processing costs were for that stock purchase. And the reports they can export give them confidence in the numbers. that they include in the financial statements.