The Alberta Securities Commission yesterday announced it had issued a Notice of Hearing to a Calgary man who raised more than $1.5-million from investors and told some he was acquiring pre-IPO shares in Facebook.
The ASC alleges that Nelson Peter Bradbury of Calgary raised the cash with without proper registration and without a prospectus or exemption. It also claims he made misrepresentations as to how he would use investors money, used investment funds for his personal use, and falsified statements of accounts to investors.
The ASC alleges that between January 29, 2010 and March 21, 2013, Bradbury entered into investment agreement with approximately 16 investors from Alberta and from out of the province. The commission says the terms of the agreements varied, but typically saw investors providing money in trust for the purpose of investing in funds with names such as “Nelson Investments Fund”, “Nelson Investments Short-Term Income Fund”, and “Nelson Investments Income Fund”. Two more were named “Nelson Investments Facebook Fund” and the “NIF Facebook Fund”.
The ASC says the investors agreed to total discretion, meaning Bradbury would control all investing on their behalf. But it says very little, if any, actual investing was conducted. Instead, they say Bradbury used a portion of the investor funds for personal credit card payments, groceries, clothing, vacations and gambling, amongst other things.
“As opposed to any discrete entity or enterprise, these “funds” were nothing more than bookkeeping or tracking mechanisms for Bradbury, and promotional measures utilized by Bradbury to offer a semblance of legitimacy to the investors as opposed to any discrete entity or enterprise,” says the commission.
On April 18, 2013 Bradbury, through his lawyer, informed investors he had lost all their money due to “market turmoil” and because of his “unlucky trading, poor judgement and unforeseen market volatility and not through his own carelessness”.
The commission says Bradbury never owned or acquired beneficially or otherwise, any interest in Facebook during the material time.
Facebook IPO’d on May 18, 2012. The IPO priced the company at $38 per share, a staggering $104-billion valuation that was halved within a few months of trading. Today, however, the stock trades at more than $100 and its market cap has surpassed $300-billion.
Bill Siegel, the CEO of SecondMarket, a company that creates a marketplace for the trading shares in private companies remembers the Facebook pre-IPO as a time of frenzy around the product and the promise that anyone could own shares in the hottest companies before they were public.
“Late 2011 was the fever pitch of pure, over-the-counter, pre-IPO private company stock trading mania, centered mostly around Facebook,” he told Fortune last year. “We knew Facebook was going public, and that was obviously a large source of revenue. But the market was shifting, starting a year prior to that. A lot of the other private companies didn’t like the way the pre-IPO market was shaping up.”
Today, notes the Wall Street Journal, pre-IPO stocks are red hot again, with investors looking to scoop up shares in companies like Uber, Snapchat and Airbnb before they are public.
The Alberta Securities Commission will convene at 9:30 a.m. on Tuesday, February 9, 2016, in Calgary, Alberta, to set a date for hearing regarding the allegations against Bradbury.