How do you turn collectibles into securities?
Using a Series LLC to raise capital for smaller assets
In this livestream recording, Jillian Sidoti of Crowdfunding Lawyers (our company’s securities counsel) and Joe discuss the legal structure and regulatory processes behind the fractional investment opportunities on Mythic Markets.
How do we use Regulation A to bring new offerings to life? (7:55)
What the heck is a Series LLC, and why is it the key to fractional? (9:18)
What are the biggest challenges to bringing new offerings to market? (10:32)
Plus: Why Joe started Mythic Markets, and an intro to Magic: The Gathering - the game that inspired it all!
Here’s an excerpt of the transcript.
Jillian: So you want to democratize the ownership of these [collectible] cards, which is really awesome. But if you want to reach the general public, you have to get approval from the SEC. And to do that, you’ve got to go through a lot of hoops. So it doesn’t make sense to do it with just one asset.
We did a Regulation A offering… I want you to explain how we did this so that the crowd could participate on an asset by asset basis.
Joe: We used Regulation A, and Regulation A+ Tier 2 specifically allows for raising up to $50 million in a single [SEC] filing. The way we’ve structured these is in Series LLCs, and so each one of these deals is its own mini company and securitized as part of Reg A+. And so we file amendments to the Reg A every time we want to file a new asset and then Reg A allows us to market and sell shares of that thing to the public - both accredited and unaccredited investors.
Jillian: And so we did a Series LLC… You can create one master LLC, which Joe has, which is called Mythic Collection - so if you’re looking for the filing on the SEC’s website it’s called Mythic Collection LLC - which is managed by Mythic Markets Inc. (the corporation).
Mythic Collection LLC has separate series in it, and each of those series owns [an asset]. So every time Joe and his people want to bring a new asset to the public, they just do an amendment to that filing, and voila - we’re able to go out and raise money for individual assets.
Now Joe, tell me some of the pains that you might have felt in this process, some of the accomplishments?
Joe: Pains are many. I think the biggest one is just time to market, and getting SEC-qualified and FINRA No Objections. I think the regulatory environment is continuing to evolve, with the goal of protecting consumers - which is really great and we certainly support that.
Investors are still getting used to this structure and so this is still kind of a new and weird thing for most people. Challenges, aside from regulatory, is largely building trust within the community, helping people to understand the difference between owning shares in a company that owns the assets versus the traditional idea of, “I bought this asset, a share for $20; why can’t I take this thing home?”
We have been able to get that qualified 1-A [SEC filing], the FINRA No Objections, we’ve gotten the broker-dealer on board, and we’re working to enable trading as well - and, you know, hopefully build a really cool business around this.
Jillian: So the trading part will be interesting because it will allow people to… go out to the crowd and say, “Who wants to buy my interest?”
Joe: Exactly. I think the trading activity will determine market value of this stuff. The Amazing Fantasy 15, for instance, actively trades and changes hands in the public and actually mostly private markets. But the value does continue to change and appreciate over time, and also in response to new films that come out. We believe that the demand for these shares will certainly determine the value of the whole asset in public markets - which may be different than the value of the whole because there’s more demand potentially for the shares than most people can afford for the whole asset.
Jillian: Right, because at the end of the day, for someone to go out and buy one single card for $90,000, is just, you know… and a lot of people are like, even if I had that money I wouldn’t spend that money, but I’d love to own a piece of that.
I of course would never predict the future value of anything… so I want to encourage you guys to go to MythicMarkets.com, make your own decisions. Read all the offering documents, read all the risks, understand what you're getting into for sure. There is no trading market - I want to be very, very clear. This is the hope of Mythic to bring this forth, which I think is very ambitious and pretty awesome in a field where these cards are in high demand and low supply. So it just gives you a great opportunity to get into something you love without breaking the bank.
Jillian: You had some issues with regulatory agencies, you had some issues with potential investors, but there’s got to be a bright sunny side to this otherwise you wouldn’t do it. So let’s hear some success stories, let’s hear some good news.
Joe: Yeah, for sure. It’s always great when we finally get through some of these regulatory hurdles. We are excited to continue moving forward with the intention of offering trading. We’ve got some really great assets in the pipeline and working on some really exciting new deals that we’re looking forward to bringing to the market. We’re also building mobile apps and things like that too. So there's a lot of really cool things that are coming that I can't necessarily talk about just yet.
Jillian: That's awesome. All right. Well, everybody I hope you enjoyed this. I know somebody said this is different. Yeah, it is. That's what makes it exciting. And kind of cool… I don't endorse any investment opportunity whatsoever, because that's me, but I've enjoyed very much working with Mythic. They very much care about the law, the regulations, making sure they're doing it right.