William Rosellini

Facebook’s Use of Regulation D

Facebook’s use of Regulation D was vital to their success. If you’re like us you’re probably wondering how Facebook got started. Well, according to the SEC’s archives, they had very humble beginnings, just like every other startup. Facebook, Twitter, Tesla, and thousands of other companies have gotten started using a purposely engineered loophole in the securities laws, also known as Regulation D of the Securities Act of 1933.

Regulation D is used to keep companies from going through the time-consuming and expensive process of registering their securities with the SEC, a process for publicly traded companies. No matter how small your company is, and no matter how small the investment is, Regulation D should probably be used to help you raise capital.

As you can see from the Form D below (submit the form to view), Facebook had early wisdom of this loophole when they used the proper forms to take their very first investment of $6,790. They then went on to conduct numerous follow-on offerings using Reg D each time, until finally they filed their S-1 to start the process of going public.

It’s important to also acknowledge that the stock being sold under Reg D was then converted into other types of shares: preferred, common, and yes, some tradable in the IPO.

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