Direct ownership over private stocks via SPVs
The easiest and fastest way for investors
to pool funds in private companies
Water park Little Island,
New York, USA
Transactions via SPV protect capital in the absence of intermediary counterparties, they get registered under the US law and prove a help to United Traders when it comes to looking for promising private stocks. Investments are currently available with at least $50,000.
What an SPV means
A special purpose vehicle (SPV) is a legal investment fund created by a limited liabilities company in the U.S. to make investments as a single vehicle.
- Investments targeted by an SPV include real estate, finished or under construction, stocks, or any other assets.
- An SPV can have an unlimited number of qualified investors and up to 35 unqualified investors.
- The legal entity that creates an SPV cannot claim assets within this SPV but doesn’t bear any responsibility owed to an SPV.
- An SPV is serviced by the Organizer, who gathers investors and finds investment targets, and the Manager, who facilitates paperwork and accounting.
Delaware is appealing for organizing transactions through an SPV in the absence of capital gains tax.
SPV with United Traders
We create a separate SPV for each transaction involving private stocks. We invite investors to join and accompany them at all stages of the transaction.
Fund Organizer
The organizer analyzes the private equity market and finds a potential target — stocks. He then initiates the process of SPV creation, facilitates negotiations with counterparties on prices and transaction size. Within the SPV, the organizer appears as a natural person. In our case, this person is a United Traders representative.
Series LLC
A Series LLC is a type of limited liability company that allows the establishment of multiple SPV entities in its structure. To provide the service in compliance with the US law, we turn to professional SPV fund administrators who already have their own Series LLC. One of them is Assure, the owner of Series LLC “Assure Labs 2021 LLC, Delaware”.
SPV’s Manager
At the request of the organizer, the manager registers an SPV fund, gets a tax number, opens a bank account, creates documents to gather investors, ensures compliance with KYC procedures, keeps accounts and manages workflow. We work with professional SPV fund administrators. Our fund managers are often individuals that represent Assure Fund Management.
Investors
SPV participantsInvestors who agree to join the transaction deposit capital into a bank account. When the manager collects the required amount of money, he transfers the money to the seller of stocks, as specified by the organizer of the SPV. In this way, every investor co-owns the share of stocks acquired by the fund in proportion to the amount of the money they have deposited.
Private stocks
After making a transaction, the balance of each SPV contains private shares owned by investors. Often, the SPV organizer (United Traders) finds an opportunity to buy preferred shares rather than common shares to render the selling price more lucrative for SPV participants under many exit scenarios.
How to invest in pre-IPO via SPV
Transaction opening steps
Offer
United Traders makes an investment proposal on behalf of the fund, which contains basic information about the investment target.
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Signing documents
1–2 daysThe investor signs basic documents that specify the terms of the investment, his rights and obligations as an investor. United Traders checks these documents.
KYC
1–2 daysAn investor receives an invitation to use the personal account of Assure fund administrator to pass the Know Your Customer procedure — client’s identity verification. KYC compliance requires you to provide: full name, email, phone number, individual tax number, a scan of your passport, confirmation of your registration address, and the bank details which will be used for making a transfer to the SPV.
Assure creates and administers an SPV fund
Transfer of investment funds
1–2 daysAfter passing KYC, the bank account details of the SPV can be viewed by the investor. Money must be transferred from the bank account you enter upon passing KYC.
Atlantic Capital is a bank all United Traders’ SPVs work with as of June 2021.
ROFR procedure
20–50 daysOnce all investors’ money is collected in the SPV’s bank account, ROFR — Right of First Refusal procedure applies. The SPV must pass ROFR before the company approves the transaction. However, in rare cases, the company can buy back the stocks the SPV has targeted as the former can exercise its right. In this case, the money returns to investors or the SPV offers them alternative conditions for their purchase.
SEC (The Securities and Exchange Commission) is a U.S. government agency responsible for regulating the securities markets.
Alerting SEC
7 daysOnce the ROFR is passed, the transaction is closed. And finally, the SPV notifies the SEC about the successful transaction.
Transaction is made
Once the SEC is notified about the transaction, the SPV is considered to be the sole owner of the stocks, and investors are entitled to the stocks in proportion to their ownership share in the SPV.
Transaction closing steps
As a rule, you need to wait 1 to 3 years before you see our investment ideas are realized. There can be three fundamentally different scenarios when it comes to an investment in private stocks: successful, neutral, and unsuccessful.
Successful scenarios: IPO, direct listing, SPAC deal, M&A deal
As soon as it becomes possible to sell, the SPV sells the stocks and receives the money into the bank account. The money is then distributed among the SPV’s investors according to their original shares.
An M&A deal is not necessarily a positive scenario. If the company proves unsuccessful, it may be taken over at a low valuation.
Early exit
You can exit the investment at any time after the opening of a transaction. In this case, the investor’s share is sold to another investor in the private equity market.
If exit is initiated by the fund’s organizer, he has to get the consent of the majority of investors (their shares in the SPV must exceed 50%). Moreover, the US law presupposes the “best effort” commitment: the SPV’s organizer can close an investment only if it benefits investors.
Exit at the investor’s initiative is possible if the investor or the organizer has interested parties vying for his share in the SPV. In this case, the organizer is not obliged to look for a new investor or buy back the share at his own expense.
The early exit scenario can be either positive or negative, depending on the stock price in the private equity market.
Bankruptcy
However, there’s always a chance that a startup may fail to take off. A company may turn out unsuccessful and go bankrupt. This is the main risk of investing in a private company. In the event of bankruptcy, investors lose all or most of their money.
Commissions
Fee on management — 4.9%, paid on top of the investment amount
Fee on profit — 10% of net profit. Charged at the closing of investment, after the rest of the commissions are paid
Related expenses are paid additionally depending on the exit procedure. For example, broker’s commission if a company goes public or due diligence costs if an M&A deal occurs
Capital gains tax. SPV is created within an LLC company that is registered in the state of Delaware, USA. This exempts an investor from paying capital gains taxes in the US but does not exempt him from paying taxes in the country where he is a resident.
Examples of transactions with United Traders
Net profit including commission fee is shown for completed deals
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