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Alternative Investments: SEC Revamps Definition of “Accredited Investor” For Private Capital Markets

The SEC on Wednesday amended its definition of “accredited investor,” a term that drew a line between high-earning, deep-pocketed investors and retail investors for access to often lucrative opportunities in the private capital markets. Also known as “alternative investments,” these markets include, for example, venture capital, hedge funds, private equity, and real estate.

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Alternative Investments: SEC Revamps Definition of “Accredited Investor” For Private Capital Markets

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It’s no longer just income or net worth. Based on their financial knowledge and experience, retail investors may also invest in “alternative investments.”

The SEC on Wednesday amended its definition of “accredited investor,” a term that drew a line between high-earning, deep-pocketed investors and retail investors for access to often lucrative opportunities in the private capital markets. Also known as “alternative investments,” these markets include, for example, venture capital, hedge funds, private equity, and real estate. (Think Advisor)

Accredited Investor

The SEC amended the definition of the term to include measures of professional knowledge, experience, or certifications or licenses such as from the Financial Industry Regulatory Authority.

SEC Chairman Jay Clayton, in a statement:

“The Commission’s use of income or wealth as the exclusive proxy for an individual’s financial sophistication and ability to assess and bear risk has long been unsatisfactory. Individual investors who do not meet the wealth tests, but who clearly are financially sophisticated enough to understand the risks of participating in unregistered offerings, are denied the opportunity to invest in our private markets. For example, using only a binary test for wealth disadvantages otherwise financially sophisticated Americans living in lower-income/cost-of-living areas.”

The SEC rules have so far defined an accredited investor as someone who earns annually more than $200,000 (for the past two years) or more than $300,000 including spouse income. In terms of assets or net worth, the threshold was individual or combined wealth of $1 million, not counting the value of the home.

Clayton added:

“For the first time, individuals will be permitted to participate in our private capital markets not only based on their income or net worth but also based on established, clear measures of financial sophistication. I am also pleased that we have expanded and updated the list of entities, including tribal governments and other organizations that may qualify to participate in certain private offerings.”

The “exclusionary” definition of accredited investor irked retail investors

The rule was meant to protect retail investors from risky and complex investments in the private markets. However, such investors have increasingly begun to chafe at the restriction.

SEC Commissioner Hester M Peirce echoed these sentiments in a statement:

“Why shouldn’t mom and pop retail investors be allowed to invest in private offerings?  Why should I, as a regulator, decide what other Americans do with their money?  The alleged justification is investor protection: people can’t lose their money on investments if they aren’t allowed to invest.  Yes, that is true, but where does that principle take us?  Someone who does not invest at all will not lose any money on investments.  She will, however, lose.  She will lose the opportunity to see her money grow more than it could by sitting in a bank account.  And, she will lose the opportunity to be part of enterprises that she believes will transform society.  She will lose her right to make decisions for herself.”

Two Democratic Commissioners, Allison Herren Lee and Caroline Crenshaw voted against the changes to the definition of accredited investor.

Related Story:  SEC to Redefine The Term “Accredited Investor” (Dec 20, 2019)

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Source: https://dailyalts.com/alternative-investments-sec-revamps-definition-of-accredited-investor-for-private-capital-markets/

Private Equity

Venture Capital: Toast Valued At $8B In Secondary Share Offering By Employees

Toast, which makes software for restaurants, has rebounded from the pandemic like a phoenix. Consider this: In February, shortly before the pandemic, the start-up raised $ 400 million at a valuation of $ 4.9 billion. After the virus, in April, Toast faced up to the economic devastation and cut its workforce by 50% through layoffs and furloughs. It also was forced to cut executive pay, freeze hiring, and halt bonuses. However, the startup’s software for takeout orders enabled in-house dining restaurants to pivot to the alternative mode of service. Result: business is good again.

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Venture Capital: Toast Valued At $8B In Secondary Share Offering By Employees

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Vested shares held by employees sold at $75 each.

Toast, which makes software for restaurants, has rebounded from the pandemic like a phoenix. Consider this: In February, shortly before the pandemic, the start-up raised $ 400 million at a valuation of  $ 4.9 billion. After the virus, in April, Toast faced up to the economic devastation and cut its workforce by 50% through layoffs and furloughs. It also was forced to cut executive pay, freeze hiring, and halt bonuses. However, the startup’s software for takeout orders enabled in-house dining restaurants to pivot to the alternative mode of service. Result: business is good again. (CNBC)

Toast valued at $8 billion

In a nutshell, despite the ravages from the virus pandemic, Toast managed to hike its valuation from nearly $ 5 billion in February to $ 8 billion in November.

With business now booming, Toast did not forget its employees. It allowed them to encash some of their shareholdings by selling up to 25% of their vested shares for $ 75 each in a secondary sale.

People with knowledge of the matter told CNBC that the secondary offer was for 800,000 shares worth about $ 60 million.

“In order to support our employees and former employees as they navigate the impact of Covid-19, we did complete a secondary offering recently,” a company spokesman confirmed to CNBC, though he refused to reveal the identity of the buyer(s) or the valuation.

A sea change in Toast’s fortunes

According to CNBC, recent bids in the secondary market have valued Toast significantly above this $ 8 billion valuation.

The company also rehired many of the personnel it had laid off earlier.

Meanwhile, the market considers the start-up as a candidate for an IPO in 2021.

Related Story:  Restaurant Software Maker Toast Raises $400 Million

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Source: https://dailyalts.com/toast-valued-at-8b-in-secondary-share-offering-by-employees/

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Private Equity

AA indicates it would accept £218m PE takeover offer

Warburg Pincus and TowerBrook offer 35p per share

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UK roadside assistance firm AA could return to private equity ownership after saying it would be prepared to recommend a £218m takeover offer from London-based TowerBrook Capital Partners and New York-based Warburg Pincus.

The two private equity groups have offered to pay 35p a share and invest £380m in the company to reduce its current debt pile of £2.6bn – much of which was accumulated when the motoring group was previously under private equity ownership.

Until 2014, when it was floated with debts of £3bn, the AA was owned by private equity firms CVC and Permira.

Rick Haythornthwaite, a former chairman of Centrica, has been lined up to chair the AA following the acquisition.

The AA said in a statement: “The board, having considered carefully the viability of a range of alternative potential debt and equity refinancing options together with its financial advisers, has indicated to the consortium that it would be willing to recommend a cash offer on the terms of the proposal.

“Accordingly, the company is engaged in advanced discussions with the consortium in relation to the possible offer.”

To contact the author of this story with feedback or news, email PEN Editorial

Source: https://www.penews.com/articles/aa-indicates-it-would-accept-218m-pe-takeover-offer-20201124

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Private Equity

Digital Assets: Gazprombank Switzerland Flags Off Bitcoin Transactions

Gazprombank Switzerland, which is the wholly-owned Swiss arm of Russia’s Gazprombank (JSC), has debuted its bitcoin trading according to an announcement on November 19 by Avaloq, a provider of digital banking solutions.

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Digital Assets: Gazprombank Switzerland Flags Off Bitcoin Transactions

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Gazprombank Switzerland announced that it successfully performed its first transactions in bitcoin.

Gazprombank Switzerland, which is the wholly-owned Swiss arm of Russia’s Gazprombank (JSC), has debuted its bitcoin trading according to an announcement on November 19 by Avaloq, a provider of digital banking solutions.

We wrote last month that the Swiss Financial Market Supervisory Authority had cleared Gazprombank Switzerland for offering crypto custody and trading services to its institutional and corporate clients.

Under that regulatory green signal, the bank kicked off its first transactions in bitcoin offered inside a solution that leverages its relationship with Avaloq, a leader in digital banking solutions, and METACO, a provider of security-critical infrastructure enabling financial institutions to enter the digital asset ecosystem. (Fintech Switzerland)

OpenVASP Association

The announcement also said that a bilateral agreement had been signed for the first time in Switzerland between a bank (Gazprombank) and Bitcoin Suisse (a virtual asset service provider, or VASP). The latter is a longtime partner of Gazprombank and one of the earliest Swiss players in crypto-financial services.

The bank also became a member of the OpenVasp Association which facilitates the transmission of transaction information between VASPs and other parties. It also helps VASPs comply with the anti-money laundering regulations issued by the Financial Action Task Force.

Transacting cryptocurrencies easily

“Digital assets will become increasingly important for our clients and the global economy,” said Roman Abdulin, CEO at Gazprombank. “Our solution allows us to make transactions with cryptocurrencies as easy as transactions with traditional assets.”

“The rollout of our crypto offering represents an important milestone in our journey to power the development of crypto and blockchain technology and provide investors, wealth managers, and financial institutions with more convenient, transparent, and simple solutions in order to accelerate their investment in crypto assets,” said Thomas Beck, Group Chief Technology Officer at Avaloq.

“This milestone highlights both the strength of our institutional operating system for digital assets, SILO, as well as the significant demand among financial institutions for trusted infrastructure partners,” said Adrien Treccani, CEO and Founder of METACO. “This rollout is another step towards our vision of bringing crypto asset management technology to financial institutions across the globe.”

Related Story:  Gazprombank (Switzerland) FINMA-Cleared For Crypto Bank Accounts

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Source: https://dailyalts.com/gazprombank-switzerland-flags-off-bitcoin-transactions/

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