Holding shares in a private Tesla outside the US

[replicant]

Help needed.

I've been trying to contact the SEC about the possible requirement for a non-US shareholders to be an Accredited Investor (to convert and/or increase holding of TSLA once the company has been unlisted or taken private).

I've sent them some question on SEC Question Form but the page didn't display a "message received" banner and they didn't email me a confirmation either, so I'm not sure they actually got my question.

Can anyone in the same situation contact them and share their answer?

Here's what I sent them:

I'm a EU citizen and shareholder of Tesla Inc (my shares are held in an ordinary securities account at a European bank). The press has reported last week that the board of Tesla Inc. is considering taking the company private.

Earlier today, the Twitter account @SEC_Investor_Ed (managed by the SEC) has posted a link to this investor bulletin: Investor Bulletin: Private Placements Under Regulation D | Investor.gov

I'm wondering if the rules listed on this page would apply to:
- shareholders who already own public shares of the company
- shareholders who are not US citizens, nor customer of US banks/institutions

More specifically, I'd like to know if non accredited investors would be able to convert their public shares (assuming the board's buy-out proposal comes to fruition). I do not reach the financial thresholds required to be one (cf. Investor Bulletin: Accredited Investors | Investor.gov) but I've been a shareholder since 2012 and I know the risks associated with such a risky investment.

I understand that the specifics of the buy-out are unknown as no offer has been published yet, so I don't expect a confirmation from you nor advice regarding this particular project. But since I couldn't find any information on your website for non-US shareholders, nor for shareholders of public shares that are to be converted to private ones, any information about such a situation would help.

Note that I've inquired my local stock market regulator and my bank but both say that the SEC regulations will apply, so I look forward to your answer. I might decide to exit my current position (representing a significant part of my financial assets) if it's not possible for non-US and non-accredited investors to have their public shares converted.

Thanks

 

[Wenche]

From what I read you want to open another account because you are uncertain if your broker would allow you to have the new shares after privatization in that account.

The new shares you refer to are not defined yet and they have a huge variety to choose from. Each of those different in structure, rights, obligations ect. Thats true for TeslaP as well as the Fidelity fund that you refer to and that may come into play. Some of those may be even able to be managed from your existing Bank or not. Who knows?!

If IKB or IB will be able to hold this shares will be known once we know how the privatization is defined in detail.

Also, the location of your shares is usually not with your Bank or Broker. Sounds strange but this is a service that the Bank where you buy usually does not provide but outsource. If you buy with IKB your shares may be located in another country. With me it was Luxembourg.

If the location of the shares has an impact if and how you can transfer to the new shares is I believe not clear to anybody yet. We can assume that its the same in Europe and speculate if its different with the US. I feel better having mine in the US but I have no clue if its the same having them in Europe. I did the relova´cation mainly because of the voting option.

Also given IB is located in the UK have you taken into account that they are UK based and there is a certain probability that the UK will crash out of the EU which will have a large impact on what UK banks can service in Europe or not? Finally all regulations between the US and UK in terms of banking after a Brexit w/o agreement are in question as far as I know as they have been based on the EU US agreements.

If you ask them they will certainly tell you all remains the same but my information are different. Frankly said to be on the safe side I would not touch a UK bank until after mid 2019 maybe even later.

I am from Norway and have an account placed at IBKR (IB) in US, not UK. Their head office is in US, and I opened my account there a few years ago. I can give you my referral link to open the account in the US. Please PM, if you are interested in the link.

 

[jbih]

That brings me to the next possible problem: Where my shares are located. IB is located in the UK

It appears that IB is actually in the US:

Interactive Brokers LLC (IB) is a U.S.-based electronic brokerage firm
Interactive Brokers - Wikipedia

Interactive Brokers is headquartered in Greenwich, Connecticut
About the Interactive Brokers Group | Interactive Brokers

 

[avoigt]

I am from Norway and have an account placed at IBKR (IB) in US, not UK. Their head office is in US, and I opened my account there a few years ago. I can give you my referral link to open the account in the US. Please PM, if you are interested in the link.

It does not make a difference. As a European citizen all what matters is your cititzenship and where you live.

You can open accounts all over the world with headquarters somewhere but you still fall under the jurisdiction of the country you live in and passport color.

But thanks for asking.

 

[jbih]

I am currently at Captrader, which is "an Introducing Broker of Interactive Brokers" (whatever that means). Captrader is located in Germany but I can use the IB infrastructure (trading software, access to exchanges, ...).

When I opened the account there was no fixed fee and the fee for one trade was 5.90 EUR. I think it's even cheaper now, but I pay for market data which is 20 EUR per month for some European exchanges.

Who we are - captrader.com

 

[aubreymcfato]

It would be very nice to create a list/table of brokers where to transfer our EU shares,
when we know more details.

I'm sure this would be a valuable resource for hundreds of people here on TMC (and thousands on Twitter, when we share it ;-)

 

[replicant]

It would be very nice to create a list/table of brokers where to transfer our EU shares,
when we know more details.

I'm sure this would be a valuable resource for hundreds of people here on TMC (and thousands on Twitter, when we share it ;-)

Can you please tell me why it might be useful for European shareholder to transfer shares to the US? I haven't read one compelling case for that, and I have 95% of my financial assets in TSLA (but I can't be an accredited investor so I'm quite worried about a forced sale).

 

[Wenche]

It does not make a difference. As a European citizen all what matters is your cititzenship and where you live.

You can open accounts all over the world with headquarters somewhere but you still fall under the jurisdiction of the country you live in and passport color.

But thanks for asking.

Ok, may be it is different in Norway since we are not a part of the EU. As far as I know the only restriction I have on my own money is to not to finance criminal activity. I am registered as an accredited investor at IBKR, so I expect no problems regarding the switch to TSLAP. I have also always got an email allert from IBKR with link to wote at The shareholdermeetings.

 

[MrDoor]

I'm hoping to get some clarity on this. I currently hold my shares with a broker in the UK in an ISA (tax free). I wouldn't be against the idea of transferring them over to a US brokerage, even if I have to pay some tax when I withdraw them. Because I truly believe that $420 is peanuts for these shares, as somebody prepared to stay invested for 5+ years. No deal.

Same situation, some things that come to mind, you will lose your tax free status when you transfer out money from the ISA which for some may mean a lot of years worth of tax free money which with interest rates rising maybe beneficial.

What I would consider a better idea is to buy in a regular dealing account and if necessary sell shares in the ISA and then you can still keep the ISA. The reasoning maybe that due to the way that ISA investments are handled a transfer will not be possible and only a sell would be an option but I think contacting your ISA provider maybe useful to clarify this.

Frankly though as much as I would like to continue with private shares if it is too much hassle I will probably sell out in the short squeeze

 

[Johan]

Help needed.

I've been trying to contact the SEC about the possible requirement for a non-US shareholders to be an Accredited Investor (to convert and/or increase holding of TSLA once the company has been unlisted or taken private).

I've sent them some question on SEC Question Form but the page didn't display a "message received" banner and they didn't email me a confirmation either, so I'm not sure they actually got my question.

Can anyone in the same situation contact them and share their answer?

Here's what I sent them:

This is not an advice. Well kind of is, more of a personal story.

I'm in Norway. A few years ago I bought stock in a private company in the US, a company that has never been traded on any stock exchange and is based in New Jersey: Lawrenceville Plasma Physics LLC. They had an offering for stock. It was only open to "Accredited investors" in the US ($200k income yearly or $1m fortune). Turns our these rules don't apply to foreigners. I was able to buy stock without any proof of income or fortune. I described the process above.

 

[Lessmog]

This is not an advice. Well kind of is, more of a personal story.

I'm in Norway. A few years ago I bought stock in a private company in the US, a company that has never been traded on any stock exchange and is based in New Jersey: Lawrenceville Plasma Physics LLC. They had an offering for stock. It was only open to "Accredited investors" in the US ($200k income yearly or $1m fortune). Turns our these rules don't apply to foreigners. I was able to buy stock without any proof of income or fortune. I described the process above.

Me 2, except I'm in Sweden. But as I recall it that loop hole for non-USians was only open for a limited number of share holders. And it was still a bit of a hassle to fix the paperwork, like getting 40 pages of contract signed by a Notary. Not sure how this applies now.

 

[replicant]

This is not an advice. Well kind of is, more of a personal story.

I'm in Norway. A few years ago I bought stock in a private company in the US, a company that has never been traded on any stock exchange and is based in New Jersey: Lawrenceville Plasma Physics LLC. They had an offering for stock. It was only open to "Accredited investors" in the US ($200k income yearly or $1m fortune). Turns our these rules don't apply to foreigners. I was able to buy stock without any proof of income or fortune. I described the process above.

In previous equity rounds, sales of shares in the US were limited to accredited investors—those with more than $1 million in assets or $200,000 in annual income. However, under new SEC rules approved last year, through the crowdfunding campaign, all investors, accredited and non-accredited, US and non-US, will be able to buy shares. A previous crowdfunding effort by LPPFusion in 2014 on the Indiegogo website raised $180,000 in donations, before the new rule allowed equity (share) crowdfunding.

Source: LPP Fusion raising $1 million via equity crowdfunding – NextBigFuture.com

They seem to only have raised $1M, so the crowdfunding exception could apply: SEC.gov | Regulation Crowdfunding

Edit: oops, that was only one of their fund raises. See Investing In LPPF which mentions SEC.gov | Rule 506 of Regulation D

The company may sell its securities to an unlimited number of "accredited investors" and up to 35 other purchasers.

 

[ggr]

Mod: There's a thread about LPPfusion over in Off Topic. I'm leaving these posts here but if anyone wants to actually talk about LPPfusion, take it there (or else!).
LPP questions/discussion
Full disclosure: I'm also an investor.
--ggr.

 

[marvinat0rz]

A couple of years back I bought shares in a privately held LLC in the US (Lawrenceville Plasma Physics). They had a public offering at the time, for US citizens you had to be an "accredited investor" meaning basically you had to show that you had a certain amount of wealth (I think a disposable income of $1 million or something) in order to be eligable as a buyer. But for foreigners no such criteria existed.

The obscure pieces of information you can learn on the TMC investor forums keep amazing me. I've been following the US startup scene for years, thinking "drats, the Sarbanes-Oxley Accredited Investor rules really screw me out of the possibility of ever being able to participate as an investor in a promising small company". Seeing as for US companies that aren't listed on the stock exchange, you could in principle buy stock in a private sale, but you need accredited investor status to do so.

Read somewhere that the clause doesn't apply to non-US persons, but I haven't gotten any concrete evidence of whether this could work out in practice before now. I appreciate it, Johan Been looking for the answer to this question fro six months now. Still a disgrace that this is impossible for the average US investor, but at least there's one loophole. I hope it will become public knowledge if The Boring Company stock ever becomes available...

 

[Johan]

The obscure pieces of information you can learn on the TMC investor forums keep amazing me. I've been following the US startup scene for years, thinking "drats, the Sarbanes-Oxley Accredited Investor rules really screw me out of the possibility of ever being able to participate as an investor in a promising small company". Seeing as for US companies that aren't listed on the stock exchange, you could in principle buy stock in a private sale, but you need accredited investor status to do so.

Read somewhere that the clause doesn't apply to non-US persons, but I haven't gotten any concrete evidence of whether this could work out in practice before now. I appreciate it, Johan Been looking for the answer to this question fro six months now. Still a disgrace that this is impossible for the average US investor, but at least there's one loophole. I hope it will become public knowledge if The Boring Company stock ever becomes available...

Take all of it with a grain of salt though (a big chunk) because it could well be, as suggested above, that the exemption was due to the offering I'm referring to being "only $1 million". (However to the best of my recollection there was some back-and-forth about the whole accredited investor thing before it became clear those rules didn't apply due to my non US citizen status).

 

[replicant]

You will sell (if you have any shares) - surge price of 3000 USD or more will clear out many. Especially foreigners who are not sure if they can hold private Tesla.

I've started to find the "foreigners can't hold" theory funnier over time because nothing substantiates it.

My bank (largest broker in France) and my local stock market regulator both said there's no reason to believe the shares can't be converted. I've yet to get a confirmation from the SEC but the "small foreign shareholders can't hold" thing is just a rumor.

As always, please refute it (with a reliable source) if you can. But stop spreading the rumor until it's been proven to be right.

 

[avoigt]

I haven't heard back from my bank/broker in Norway yet (DNB Markets). But I do have one personal experience that may be relevant: A couple of years back I bought shares in a privately held LLC in the US (Lawrenceville Plasma Physics). They had a public offering at the time, for US citizens you had to be an "accredited investor" meaning basically you had to show that you had a certain amount of wealth (I think a disposable income of $1 million or something) in order to be eligable as a buyer. But for foreigners no such criteria existed. So what I did was basically e-mailed back and forth with their CFO, was sent a contract which I borught to a Notary Publicus after I had signed, transferred money to their account and returned the signed contract. After a week I recieved a stock certicate showing the number of stock and class of stock that I now own. I keep this paper in a safe and have made digital copies. My stock broker here in Norway know nothing of my ownership of these shares and frankly I don't know the specifics of how/where my ownership of these shares is kept record of in the United States. I assume the company has a formal record, but I don't know if the US authorities or some external party also has a record?

My understanding is that Elon wants so set up some kind of fund to manage private ownership, which would also cater to retail investors. I think all of this will be worked out for us non-US stock holders.

My big worry is that if TSLA is taken private and I decide I want to keep holding the stock privately that the conversion from TSLA [public stock on NASDAQ] in to TSLA [share of privately held company] will be treated by my local tax authority as me selling my stock and/or trading one stock for another stock (which is considered tax-wise a sale) thus incurring a very hefty tax bill.

This is an interesting piece of information. Thanks for sharing.

The process sounds like you did get a contract from the CFO of that company you purchased shares from. I was under the impression that an AI is an investor statue in the US that allows you to purchase certain kind of stock in a private company and that this will be given from the SEC.

So my question is, is your status one that is similar to a standard AI and what needs to be done to get a standard accreditation as a European? Appreciate information about that,

 

[avoigt]

I've started to find the "foreigners can't hold" theory funnier over time because nothing substantiates it.

My bank (largest broker in France) and my local stock market regulator both said there's no reason to believe the shares can't be converted. I've yet to get a confirmation from the SEC but the "small foreign shareholders can't hold" thing is just a rumor.

As always, please refute it (with a reliable source) if you can. But stop spreading the rumor until it's been proven to be right.

I do agree there is a lot of discussions these days without certainty how it will look like. As of today I believe that Elon is someone who will make the participation possible to all shareholders as he confirmed twice. This includes international as well as smaller.

Beside of that its not unusual that different kind of shares can be bought from the same company and as an AI you may get access to both. This can give you more flexibility.

Again this is just speculation.

 

[RedSquirrel]

This is an interesting piece of information. Thanks for sharing.

The process sounds like you did get a contract from the CFO of that company you purchased shares from. I was under the impression that an AI is an investor statue in the US that allows you to purchase certain kind of stock in a private company and that this will be given from the SEC.

So my question is, is your status one that is similar to a standard AI and what needs to be done to get a standard accreditation as a European? Appreciate information about that,

As far as I know there is no official declaration as an AI. Either the company or your broker will check if you fulfill all requirements for the AI status. What we still don't know is if we need to be AIs. If so it will probably be done by the broker due to the vast amount of individuals. And what I'm still not 100% convinced of is if foreigners need to be accredited at all. If necessary this is actually my largest concern why I'm thinking of switching the broker: I'm just not trusting mine enough to perform all necessary actions to accredit me, while its probably a standard process for an US one.

 

[aubreymcfato]

Can you please tell me why it might be useful for European shareholder to transfer shares to the US? I haven't read one compelling case for that, and I have 95% of my financial assets in TSLA (but I can't be an accredited investor so I'm quite worried about a forced sale).

I *hope* you're right and this is not needed, but we don't know that for sure (we don't know anything for sure).
If as EU investors we are able to keep things as they are, I'll be very very happy.
In the meantime, we are exploring different scenarios.