[MUD-Dev] [BIZ] Selling Stock (formerly Blacksnow revisted )

Robert Robert
Tue May 7 03:38:57 New Zealand Standard Time 2002

Matt Mihaly wrote:
> Amanda Walker wrote:

> Selling shares in a company requires spinning off your game into a
> separate company, registering with the SEC, and then abiding by
> the -numerous- rules regarding stock transactions.

You don't have to spin your game off into a separate company unless
you wish to do so to avoid equity dilution in the primary
company. However, anyone considering this should consult with an
attorney first if you have any debt on the books. You risk being
sued if it appears you are divesting the assets of your company to
avoid their exposure to creditors seeking payment on outstanding

>> Yes and no.  You can incorporate and sell stock without
>> registering those shares or listing them on any market.  Most of
>> the rules apply to what the stockholders can or can't do with the
>> shares.  You would have to file an annual report and other such
>> stuff, of course.

Yes, of course you can incorporate and sell stock, however as Matt
noted, there are numerous rules and restrictions regarding
this. Offering stock in a company to the general public (such as
listing on a website that you are selling x shares for y dollars) is
considered a "public offering" and if this is not registered
appropriately with the SEC, there can be very heavy penalties
against the company and its officers from the SEC. Rules governing
shareholder rights and share transference are usually specified by
the shareholder agreement.

There are exemptions to the Registration requirement under
Registration D of the Securities Act of 1993. Some of the
Registration D (commonly referred to as Reg D) exemptions have
restrictions that include the number of investors, the amount of
money raised within 1 year, and the type of investor (usually
"accredited" which is defined as (if memory serves) as an investor
with a net worth of $1M or that has a gross income of over $250k per

To further complicate things, you must comply with State securities
laws in addition to federal laws, and many of the States require a
"blue sky" filing before you are allowed to approach someone to
invest in your company. By the way, giving someone a copy of your
business plan can be -considered- making an offer depending on the
context of the situation. An attorney neglected to tell me this in
one of my first ventures and it caused us one expensive problem to
fix since we made more "offers" than our exemption allowed.

No matter how you slice it, unless you have a formal public offering
(IPO), you can't get around the laws and offer stock in your company
to gamers in a public setting (If there is someone here with
experience to the contrary, I would love to hear from you how you
did it). There are plenty of other creative ways to raise money
without selling stock.

By the way, I am not an attorney, but I have raised a fair amount of
money over the years from private investors, and I know how the
process works. My best advice is to get a corporate attorney
familiar with the process if you are looking to raise money from
private investors or venture capitalists.  There are a lot of other
issues to consider beyond the SEC laws.

Shameless plug: I do business consulting on the side if anyone is
looking for help with business plans and fundraising.

Some Resources:




Robert Rice
robert at zreality.com

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