Companies’ ‘Free’ Enterprises a Challenge to Regulators
Buy our beer and get free shares of our stock, a brewing company wanted to beckon on the Internet. The brewer put off the plan after federal regulators said the stock wouldn’t really be free, but at least one other company is pursuing this new type of giveaway.
Regulators will be challenged by Simplystocks.com, which provides research data for investors.
“We want to get people attracted to our Web site,” Jay Lacny, the owner and president of San Diego-based Simplystocks.com, said Friday.
Lacny said he disagrees when regulators contend that people make a form of payment when they visit a firm’s Web site and provide their name and other personal data.
If someone receives stock in exchange for providing personal data to a company, the Securities and Exchange Commission figures, the person is actually buying the stock. That means the company has to register the giveaway with the SEC as a stock sale or demonstrate why it should be exempt from registering, the agency says.
“It’s really not free,” Brian Lane, director of the SEC’s division of corporation finance, told an audience of securities lawyers Friday. He likened the idea to giving a Caribbean vacation to someone who provided his income data and other personal information that is valuable to a company.
Lacny said he plans to go through regulatory channels and contest that view, maintaining there’s no payment involved in giving personal data to a company Web site.
If it prevails, Simplystocks.com should be able to launch its stock giveaway sweepstakes in about a month, he said. The firm wants to offer the possibility of getting free stock to people who visit its Web site during a six-month period and give their name, address, Social Security number, telephone number and e-mail address.
A computer-generated formula overseen by an independent party would be used to select the recipients of the stock. The total stock given away would represent 10% of Simplystocks.com’s shares.
But American Brewing Co. recently dropped its plan to give consumers one free share of nonvoting stock for every 24 bottles of its Hard Hat beer they bought. The small brewery based in Lake Park, Fla., had envisioned distributing about 400,000 shares that way, or 20% of the total, and had sought an opinion from the SEC last month.
George Poncy, the company’s president and sole owner, said Friday he had just decided to take the business public, in which case a sale of shares would have to be registered with the SEC anyway. After that, American Brewing could do the same kind of promotion.
Poncy described Hard Hat as “a middle-of-the-road, true American lager.” The label on the bottle cautions that it’s “not recommended for ladies of refinement and gentle manners.”
Three companies, Travelzoo.com, E-Compare and Exit23b.com, offered free stock on the Internet in recent months but recently stopped doing so, according to Simplystocks.com’s Lacny. The companies couldn’t immediately be reached for comment.
Exit23b.com, which describes itself as a Web site for buying electronics, interactive games and other entertainment products, has a notice on its site thanking customers for their interest in its stock giveaway, which it says has ended. “We have reached our goal and will not be accepting any more entries,” the notice said.
E-Compare, an online company providing comparison-shopping information for books, has a posting saying its “free stock distribution has been voluntarily suspended pending clarification of SEC . . . rules on the matter. . . . We will notify you as soon as we resume giving away E-Compare stock.”
