The Securities and Exchange Commission has stopped a pair of advertising executives who launched a campaign to buy Pabst Brewing Company by soliciting investors on Facebook and Twitter.
The two ad executives, Michael Migliozzi II and Brian William Flatow, launched a Web site in November 2009 called BuyaBeerCompany.com. Migliozzi, 45, was managing partner of an ad agency called Forza Migliozzi, while Flatow, 41, was the president of another advertising agency called the Ad Store. Pabst was owned by a private charitable trust at the time and had been looking for a buyer.
They used social media to solicit pledges for a $300 million acquisition of the venerable beer company, creating a Facebook page and Twitter account to advertise their offering. Would-be investors who visited the Web site were told that each investor would receive a certificate of ownership as well as beer of a value equal to the amount invested.
The two men required that the investors only supply an email address, first name, last name and pledge amount. If they received $300 million in pledges, the pair planned to collect the pledges and try to purchase Pabst.
As of February 2010, they had received more than $200 million in pledges from more than 5 million pledgors, and were searching for a firm to help with the acquisition. The Web site continued to solicit pledges until it was taken down in April 2010. In the end, though, the two never received the $300 million in pledges, and never collected any money. In June 2010, Pabst was ultimately acquired by consumer products manager Metropoulos & Co.
Under federal securities laws, the two men were required to register their offering before seeking to sell shares to the public. The registration requirements include publicly disclosing a company's financial condition and other information that could help investors determine whether to invest. Since the two ad executives never registered with securities regulators nor made the required disclosures, the SEC issued a cease and desist order, to which Migliozzi and Flatow have consented, the SEC said Wednesday.
“All investors are entitled to know certain basic information about a company before being asked to invest,” said Scott Friestad, associate director in the SEC’s Division of Enforcement. “Just because would-be investors are being solicited online doesn’t make them less deserving of the protections under our securities laws.”
While federal laws require the registration of solicitations or “offerings,” some offerings are exempt, the SEC noted. Some of the most common exemptions from the registration requirements include private offerings to a limited number of accredited investors or institutions, as well as offerings of limited size.
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