Public Offering to Become a Shareholder in Purism

We are excited to announce that Purism is raising capital on StartEngine. You can (and should) invest today, minimum investment is $500.

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Just an aside here.

Normally non-public equity is sold through SEC Reg D, which can be marketed only to accredited investors. This is apparently sold through SEC Reg CF. Reg CF is relatively new (May 2016); the CF stands for CrowdFunding; it requires an SEC registered intermediary; it has limits regarding the amount of shares that can be sold every year and limits for how much non-accredited investors can buy. I don’t like this new rule … mostly, I confess, because I don’t know what safeguards are in place to deal with misleading advertisements and shady intermediaries.

For example, I truly dislike the “and should” part of the posting. Reg D would not allow such an advertisement and expression at all.

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Investment safeguards are published in the StartEngine Investor FAQ and company details are available on the campaign page listed above. Purism has filed all documentation and has been thoroughly vetted by StartEngine prior to any public listing, and StartEngine is the responsible party to the SEC.

Businesses are required to maintain their public disclosures and file an annual report with the SEC until certain conditions are met. Source

The post above is David’s candid statement about the campaign. Here, I’ll reword it:

We are excited to announce that Purism is raising capital on StartEngine . Invest in the future you wish to see with a minimum investment of $500!

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This is also how it was worded in Purisms email.

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StartEngine is an SEC registered intermediary and I’m confident they are following the rules.

That said, I’m not sure those are “safeguards” since their are no real guarantees of anything. They do, however provide the superficial terms (although not the actual shareholder agreement). I’ve found that people generally don’t read these or even truly understand what rights a normal stockholder has. I would like to underscore some concerns:

  1. Under “terms” it indicates that while these are voting shares, the owner of the shares gives an “irrevocable” proxy to the CEO. i.e. An “investor” must give all voting rights (and thus decision power) to the CEO. This proxy only terminates if/when a public offering is made. Without voting rights, IMO, you don’t own anything — the CEO can dilute ownership by further offerings.

  2. It does not disclose what StartEngine’s take will be. It does say they are getting that from Purism … but they aren’t doing this for free. Given (3), below, it’s probably at least 10%. Why isn’t this disclosed?

  3. People who are “StartEngine Owners” get a 10% discount compared to normal people. The SEC generally likes to treat all investors as equal … and this doesn’t. My question is: Isn’t this a “self-dealing transaction”? I’m not expert, but if StartEngine were a fiduciary rather than a SEC registration intermediary, I think this would be illegal. I don’t like it.

  4. The “Time Based Perks” sound very much like light late night shopping channel sales techniques. I don’t like it.

  5. The only filing with the SEC is the offering memorandum. https://startenginebetadev.s3.amazonaws.com/production/startups/655e946480aa1d03e3cf1a32/documents/offering_details/Purism_Form_C_V1.26.pdf It basically reads as a list of disclaimers — i.e. don’t assume that the SEC has looked over anything and that the accounting and reporting are up to par for a SEC registered company (SOX, etc.).

  6. As has been pointed out on these forums before, Purism is registered as an SPC and, as such, has a requirement to annually file/create a “Special Purpose Report”. AFAIK, they have never done this.

  7. I don’t believe the “shareholder’s agreement” is made public (you need to provide an e-mail+login to StartEngine). Given that one cedes their voting rights to the CEO, one should question whether there are really any normal investor rights.

Caveat Emptor. Without voting rights, it’s not clear exactly what you actually own with this “investment”. It’s not publicly traded, so it’s not clear that you can get out of the “investment” at a fair price (and/or transaction cost). i.e. It’s possible that this is an “investment” with similar risks to an “investment” in a timeshare.

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Purism’s SEC filings can be found here: https://www.sec.gov/Archives/edgar/data/2007806/000166516024000045/0001665160-24-000045-index.htm

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The document does however cover what the situation would be in the more usual situation regarding voting rights i.e. the effective result would not be much different. Refer page 15.

You would want to consider how many shares are on issue, how many shares may arise from the conversion of the various Convertible Notes series, and how many shares (maximum) are being issued under this offer.

I believe it does, on page 20, but I may be misinterpreting.

This is fairly normal. No company wants to be sued because the investor was not warned about all the things that can go wrong in investing. So the document ends up looking fairly gloomy as they attempt to cover absolutely everything that can go wrong, and a lot of things mentioned are, frankly, obvious. So it’s both CYA and genuinely things for the prospective investor to consider.

Realistically, IPO may be the only exit. That is fairly normal for an early stage investment. Also note page 15 regarding Transferability.

Or: Caveat Investor. Let’s not crap around. The very first paragraph says: You should not invest any funds in this offering unless you can afford to lose your entire investment.

I personally apply that to every investment.

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Instead of a proxy, do they also have non-voting “preferred” shares?

I highly encourage anyone with specific questions about the campaign to post them directly on the campaign page under “Join the discussion.”

There are two type of communication that is permitted by the SEC in regards to marketing your raise post launch: 1. Communications that don’t mention the “terms of the offering” Source

Part of this is so that there is a single-source-of-truth of the terms and investors are not provided misleading or outdated terms. In this case, the StartEngine campaign page is the single-source-of-truth (along with the supplemental SEC filing documentation used to create the campaign, of course).

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I somehow got confused on the offeringletter and thought it was much more abbreviated than it was. Your comment straightened me out on that. In the context of the full letter, many of my concerns are not as valid – it is a proper full disclosure. Thanks!

I don’t know what is meant by the detail on page 20. However, FormC ( https://www.sec.gov/Archives/edgar/data/2007806/000166516024000045/xslC_X01/primary_doc.xml ) does address this:

  1. Amount of compensation to be paid to the intermediary, … It is between 7% and 13%.

  2. Any other financial interest in the issuer held by the intermediary, or any arrangement for the intermediary to acquire such an interest: … 3%.

I think my guess of 10% is the most likely. The +/-3% range (7%-13% is 10%+/-3%) is possibly due to some ambiguity over what (2) means (… or it’s related to the listed perqs). It’s either a grant of 3% of the shares to StartEngine (… and, so, 13% …) or it’s a requirement that StartEngine (and/or its “Owners”) acquire 3% of the shares (… and, so, a net of 7% cashflow).

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So, hypothetically, if I get some disposable income is it better for me to buy Purism products and hide them under my bed in case something bad happens to this company and I need replacement parts – or is it better to invest in these sort of “shares” of stuff?

I’m not asking for licensed investment advice, just opinion about which pathway is more likely to lead to a better outcome for free software.

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That’s a fairly difficult hypothetical but if it were me, my first question would be: consider what country you are in. For example, StartEngine says

we are not currently accepting investments from UK or Canadian investors

So if you are in one of those countries, the hypothetical is not in fact difficult. (There may be other countries where the law in your country prevents you from investing.)

However in light of what @JCS has subtly requested above :wink:, I’m going to leave this topic. Anyone who is genuinely considering investing should follow the link in the OP and post their question(s), if any, there.

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b2b and b2g will take Purism to next level.

Now just over 50% of sales are b2c, but the model has been proving proper by forming a strong foundation with b2c (sell thousands of devices to thousands of customers), expanding b2b (sell thousands of devices to a few customers), and b2g (sell many thousands of devices to a select few customers). We have long believed that b2b will be greater than b2c sales and that b2g will be even greater than b2b sales, and our trend of the past few years is living up to that belief. - Todd, FAQ

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https://www.startengine.com/offering/purism Shows 403 Forbidden

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Disable your VPN if you have one installed:

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Turn off your VPN?

(Yeah, that’s not great, given Purism’s focus, but it’s StartEngine’s decision.)

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Ah, the beginning times of the clamp-down! Not a fan of where this is going in general on the internet :roll_eyes:

Thanks for the notification guys. I remember a couple days before it worked so didn’t think to turn off VPN.

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Maybe but the reality is that in some countries it is a legal requirement for the true identity of all shareholders to be public (and that hasn’t changed). That isn’t really compatible with the internet era, and certainly isn’t compatible with using a VPN to pay by cryptocurrency and giving a fake id (not that I am suggesting that you personally intended to do that).

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Revealing true identity does not necessitate revealing true location, IP address, and ISP. Banking and stock trading can be done using a VPN in the USA. Blocking VPN users is unnecessary.

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In my country it includes your address (location). Corporations law doesn’t care about IP address though.

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