Early Investing

Eight Wishes for Early Investors

Eight Wishes for Early Investors
By Andy Gordon
Date December 18, 2019

2019 has come and has almost gone. It was a good year for early investors. But it could have been so much better. If only certain things had zigged instead of zagged. Next year, I’m hoping for more zigging and less zagging. So here are my eight wishes (one for each day of Hanukkah) to make that happen in 2020…

1. A bitcoin ETF. Is this too much to ask? I don’t think so. Then again, I don’t work for the Securities and Exchange Commission (SEC). And the SEC has been pretty clear that it is too much to ask. The biggest problem? The SEC doesn’t trust the bitcoin market. The way the SEC sees it, the bitcoin markets are filled with fake volume and real manipulation. It’s wrong. But that’s the way the SEC sees it. And that makes it nervous. Next year, we’ll see more bitcoin futures platforms… more derivative contracts… and more volume on the spot market. Derivatives products are also more tightly regulated than the underlying spot market. All of this should help regulators become more comfortable with digital asset trading and approving its first bitcoin ETF.

2. More clarity on the legality of initial coin offering (ICO) raises. When is a token a security and when is it not? Unbelievably, it’s still not clear. And we can’t count on legislation to make matters any clearer next year. So I’m wishing for the courts to step in. In cases like U.S. Securities and Exchange Commission v. Kik Interactive, it’s quite possible that the judiciary will further define how basic securities-related doctrines like the Howey Test apply to crypto tokens and ICO raises.

3. Hester Peirce for SEC chairman. SEC Commissioner Hester Peirce began her takedown of the SEC’s decision to reject a bitcoin exchange-traded fund proposed by the Winklevoss twins with the three simple, yet powerful words – “I respectfully dissent.” She correctly pointed out that if the SEC’s argument was applied to other commodities, there would be no ETFs tracking the price of gold or oil. Alas, current SEC Chairman Jay Clayton’s term expires the year after next. And it can be extended an additional 18 months. This wish is strictly wishful thinking.

4. More liberal accredited investor qualifications. I’ve made this wish every year for the past five years or so. I make it because I hear rumors every year that the SEC is considering expanding its requirements for accredited investor status. Right now, investors have to either make $200,000 a year or show a net worth of more than $1 million (excluding main residence). This year, the rumors seem a little more grounded in fact. The SEC recently issued a meeting notice that said its “accredited investor” revisions “are intended to update and improve the definition in order to identify more effectively investors that do not need the protections of registration under the Securities Act of 1933.” From studies the SEC has made in the past, that means considering a person’s investing experience, education or special training. 2020 could be the year this actually happens.

5. Nailing Purdue for $15 billion. Purdue Pharma, more than any other company, was responsible for launching the deadly opioid epidemic. Purdue built its marketing campaign around the lie that addiction rates in patients were extremely low and that physicians who denied patients opioids were simply allowing their patients to suffer. One state attorney general says the Sackler family, which owns Purdue, has taken $11 billion out of the company in the last decade. Purdue now faces more than 2,600 federal and state lawsuits. Under a recent settlement agreement, it agreed to provide plaintiffs with $3 billion. But that’s way too low. The Sacklers should give back ALL the money they made from pushing opioids and then some. Fifteen billion dollars is a reasonable number, and it should be nonnegotiable.

6. A ride in a flying taxi. Flying taxis, also called passenger drones, are coming. Most max out at around 100 mph. And they don’t have great range. They can cover 60 miles to 220 miles in a single flight. But who cares? If you can’t afford space travel (and who can?), this is the next best thing. To make my wish come true next year, I’ll probably have to go to Europe. The U.S. will see these babies fly in a couple of years (possibly more) after they make their first appearance in Europe.

7. The demise of Facebook. Facebook-owned Instagram recently removed a post by an artist who was critical of the Chinese government. Death threats made against the artist remained uncensored (Instagram later restored the artwork). Facebook apologized, claiming that the censorship was due to “a mistake.” All we get from Facebook is bad behavior and apologies. Enough. No single company should have this much control over what we read and see on our screens. Now Facebook’s growth has slowed. And I’m waiting for a dynamic social media platform built on a blockchain platform to take its place. These platforms will let users control and protect their own data. Their time has come.

8. A $5 million upgrade to Regulation Crowdfunding. Under Regulation Crowdfunding, companies are allowed to raise only $1 million. That’s just not enough. And it hurts the appeal of crowdfunding for dozens of seed-stage companies. I’ve seen legislation that proposes raising the limit to $5 million, but we shouldn’t have to wait for an act of Congress. The SEC can initiate this change on its own without congressional approval. Seed companies usually need more than $1 million to reach Series A funding. It makes too much sense for both startup founders and early-stage investors for this NOT to happen.

I’m sure some of my wishes will come true in 2020. 2019 was a pretty good year. With a little wish fulfillment, 2020 could be even better.

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