On August 26, 2020, the SEC adopted amendment to the “Accredited Investor” definition, which determines who can participate in most offerings in the private capital markets. While the definition historically limited access to individual investors who met a specific income or net worth test, the amended definition now allows investors with sufficient knowledge and expertise to participate in...
The COVID years are proving to be a time for reflection – a relatively chaotic period that’s forcing us, both personally and professionally, to reconsider how and why we conduct our lives the way we do. Your investments are, obviously, an important reflection of your values and priorities. What Carofin offers, and why we hope you will be attracted to the companies we represent, is captured in...
The following outlines the different approaches required for Investors to qualify as Accredited Investors under Rules 506(b) and 506(c). As of September 23, 2013, all Investors participating as Accredited Investors in Regulation D, Rule 506(c) and Rule 506(b) Private Placements must verify that their financial status qualifies them as an Accredited Investor. The manner in which they verify...
Does it surprise you how inventive entrepreneurs are when problems arise? Here’s one that struck our fancy. We call it “The Case of the Slipping Shipping.” Years ago, a business owner was mystified. He would load a truck in one location for a customer delivery about 50 miles away. Each time he did so, what should have taken at most an hour and a half was taking 3 hours. His customer,...
The pricing of private securities is obscured by several factors: each is unique, analyses available for public securities don’t exist, and easy comparisons don’t exist. Cash-on-cash, simple interest, and IRR are useful metrics, but only if you apply them correctly. Let’s make sure that, when we’re talking about a Return on Investment (ROI, return or yield), we’re saying the same thing. It’s...
The rules are very different in the private markets, and you should know the difference if you’re going to play the game. We all know that you can trade public securities. The most well-known exchanges include the New York Stock Exchange and NASDAQ for U.S. public equities and the institutional “bond markets” for government and corporate debt. Don’t expect to trade your investment in a private...
Just as with public securities, private securities are generally either equity or debt, but that’s the simple part. The most commonly encountered forms of equity are called venture capital and “Private Equity” for private equity (yes…it’s used interchangeably), and senior vs. subordinated debt for private debt. They attract investment because they command higher returns, based solely on their...
Stock prices and bond yields are easy to find. But it’s challenging to confirm whether the terms of a direct investment in private placements are fair. Given that the private securities markets (over $2.4 trillion/year raised in the U.S.) are now larger than the public markets, we offer this framework to lend some perspective. The pricing of...
In the interest of accessibility, here are some terms that any investor should be familiary with.
Stay engaged with new knowledge base content and deals as soon as they hit the market.