Pre-IPO Investment Scams
SEC staff continue to receive complaints — and to bring enforcement actions — involving investment scams that purport to offer investors the opportunity to buy “pre-IPO” shares of companies.
"Pre-IPO" investing involves buying a stake in a company before the company makes its initial public offering of securities, also known as “going public.” Many stock promoters entice potential investors by promising an opportunity to make high returns by investing in a start-up enterprise at the ground floor level.
Fraudsters may use pre-IPO offerings to conduct investment scams. Common red flags in pre-IPO investment scams include unregistered investment professionals, aggressive sales practices, social media solicitations, and fraudsters claiming that the companies they promote are focused on emerging technologies or industries. These types of scams may be promoted on social media and websites, by phone, by email, in person, or through other means.
Claims about pre-IPO offerings may be false or misleading. Fraudsters perpetrating pre-IPO scams may tout that they have created investment opportunities for you (as opposed to just for the wealthy) and falsely claim that they won’t make money until you make money. They may use impressive-looking websites, online postings, and email spam to entice potential investors. To lure you in, they may make unfounded comparisons between the company they are promoting and other established, successful companies. They may make claims about the timing of the IPO — for example, they may say the IPO is “imminent” or will be “this year.” But these and other claims that sound so believable at first often turn out to be false or misleading.
