Re: The Legality of Shares for Advertising
As we know, the SEC has enacted legislation to curb S-8 abuse, i.e. the practice of paying shares of stock to people who essentially are being compensated for hyping the company (see: #reply-9784730).
However, according to information passed on to me by someone who contacted a securities lawyer, this only applies to reporting companies since only reporting companies can do an S-8 registration in the first place. PINC is not a reporting company! So, even had PINC directly paid thesubway.com, it would not technically have been illegal. Sleazy, yes IMO, but not illegal.
What if PINC had been a reporting company? Well, recall that the shares were given by a shareholder, not an "insider (i.e. officer, director, or employee). So, I suppose, that is probably legal. As for the shareholder, if PINC sold them cheap shares, PINC would need to file an S-8 at the time that transaction took place.
On a slightly related note, I found this disclaimer by Market-Pulse quite crafty:
Ronald S. Laura Enterprises, Inc. paid $4,250.00 to MSI. Ronald S. Laura Enterprises, Inc. will allow MSI to purchase 425,000 shares of Ronald S. Laura Enterprises, Inc.'s common stock at a discount price of $0.01 per share. market-pulse.com
I can just imagine how this idea might be abused: company writes a check for $X to Mr. Tout. Mr. Tout then endorses the check and hands it back to the company for Y shares of stock for next to nothing. Technically, money has changed hands-- but only on paper! The end result, of course, is stock for services!
- Jeff |
