As previously mentioned, this will be a highly manual process. The main reason for this is to comply with SEC regulations. Briefly, one of the SEC’s primary interests in this area is to protect the small investor, specifically the unsophisticated investor. One of the ways they do this is by limiting access to “each other”, that is, unsophisticated investors are not accredited, and therefore are not allowed to invest in some opportunities. Similarly, the companies seeking capital are not allowed to market to these unsophisticated investors. As presently structured, NFTs that are placed on a trading exchange violate these rules. So we will create the NFT and register it on the blockchain, but not trade it on an exchange. Our NFT will initially be traded in a manual setting. One of our goals is to innovate in this space so that one day the SEC will approve the trading on an exchange of an NFT instrument such as ours.
The Process:
100 shares of preferred stock will be sold manually through a Vickrey Auction process. A Vickrey auction is a sealed bid auction where the second highest bid is the winning bid and the transaction price for all. (Up to 500 of 1000 total preferred shares will be sold in a series of similar auctions).
Note: Bids will likely be accepted by email only, using a specified form. This provides for a transparent, sequential timestamp of when bids are received. In the case of a high volume of bid responses, the Mid Atlantic Growers Association reserves the right to cut off accepted bids at a specific time of its choosing, but before any bids are opened or reviewed.
Once the bids are opened and reviewed and a winning bid is selected (second highest bid as per Vickrey rules), bidders who bid within 20% of this amount will be contacted and invited to continue the process.
All bidders will be required to complete a due diligence process that complies with SEC Regulation D Rule 506 (c).
This universe of bidders will be offered shares in a top down manner, i.e. those who bid the most will be offered shares first, until all 100 shares have been sold.
Successful share purchasers will then complete documentation officially recording the shares as theirs.
These shares will then be registered on the blockchain, but as mentioned earlier, will not be eligible for trading on an exchange. Trading will be accomplished in a private setting, and after a likely holding period of as long as a year.
Note: This linking of an NFT to a share of preferred stock is being positioned and structured as a mid to long term investment, not an opportunity to get rich quickly. It is also a way to bring sophisticated capital into the industry and to make it available to small businesses, not just the large corporations.