Re: Rohit Req: A Linux lament

Gregory Alan Bolcer (
Sat, 31 Jul 1999 08:19:54 -0700

The other reason is that the SEC limits the number of pre-IPO
non-accredited investors for risk reasons. The more non-accredited
investors in a pre-IPO venture roughly increases the chance that
the company will get sued after any 10% drop in price, i.e. the
stock could go up 90% and back down 10% and the suits will still
get filed by novices saying that they didn't understand the risk.
RedHat only has $10M/year revenues, so anything higher than an
$8-$12 price is pure bubble-mania hype. Current SEC rules
limit it to 30 for some classifications of pre-IPO companies. It turns
out to be a really hard thing to reclass your company as it may
adversely effect every single previous investor.


Yes, yes, I'll eat those words.

Jeff Bone wrote:
> Yup, this is the dreaded "SEC Accredited Investor Status." It's a bad,
> bad thing. Essentially, the criteria for participating in certain
> speculative investments per our friendly federal government and its
> securities market SS troups, the SEC, are rather ambiguous; but they're
> rougly as follows: $1M in net worth, or $500k and $200k annual income,
> demonstrable for some period of time (3 years I believe.) The
> ostensible reason for these rules is to "protect" naive investors from
> risk. One side effect, as noted, is that in essence the most lucrative
> investments are only available to those who already have money. A cynic
> (as I am on some days) might think that in fact that's what the rule was
> designed to do.