Japan Security Dealers Association proposed banning IPO of companies who have been fundraised by individual investors except the companies’ employees and founder’s family, and that news caused a sensation in this country’s tech start-up community. The association aimed at preventing fraud over unlisted shares, but the banning would make start-ups harder to go IPO if they’ve been fundraised by individuals in the seed stage financing.
Company founders who had been financially assisted by their friends and colleagues were asking people for expressing their objections against the proposal on Twitter, as a result, the association was forced to postpone the banning.
Public comments, a system giving citizens opportunities to express approvals for or objections against a proposal before deciding it, have been used as a good excuse by conservative bureaucratic organizations and the old-economy. But Twitter leveraged its social media power in this case.
“Can a start-up own a capital enough to devote themselves to their business or not? That decides if they can survive. Usually that kind of money comes from individual “angel” investors”, a CFO of a start-up says.
“We were not intended to ban angel investments, but probably the expression of the proposal might be insufficient to make people understand correctly because we’ve been criticized. we may have to yield a countermeasure to this.”, Hirofumi Uchio, the association’s general manager of self-restraint dept. says.
- Nikkei Business Online[J]: New Regulation on Investing on Unlisted Companies Makes Them Pale.
- Sec Dealers Assc’s Proposal: A new regulation to protect individual investors from inappropriate pre-IPO fundraising [J, PDF]