[kooshball]

there used to be rules that companies must be public if they have other 1000 investors. is this no longer the case?

[yieldcrv]

it's still the case, but there are never 1,000 investors, there's a couple dozen VC firms, SPVs, and individuals

if you're smart.

I don't think this is an SEC problem, they are fully aware that people subject to their jurisdiction can jump through many hoops to circumvent them. This shows consent on the investor's part well enough, and capital formation regulations do not burden the investor at all, they are only constitutional because they burden the organization raising capital, who simply needs to do a cursory check - not an in-depth one. (level of depth is based on which regulatory exemption is chosen)

So as long as you separate concerns the SEC is satisfied.

[solatic]

If employees get stock options and decide to exercise on exit, they count against the 500 unaccredited investor limit that would trigger reporting requirements. So companies that issue stock options do have an outside risk that enough employees will exit, exercise their stock options, and trigger a reporting requirement.

[ares623]

tbh that 1000 investors limit sounds like it was trying to address a similar problem? i.e. if a company is big enough it is important to reel it in a bit or else shenanigans happen. And just like all rules, the people at the top can easily work around it.