Advertising stock options

[Gary_Gummow]

I bought transferrable (I can sell them) stock options from Homestead Investments LLC (Springville, Utah) which owns Class B common non-voting stock in Switchpoint Networks (formerly AirSwitch Corp., a Utah corporation) (www.switchpointnetworks.com) which has not yet gone public. It is my understanding that soliciting or advertising the sale of pre-IPO stock is not legal. But what about stock options? Can I advertise my stock options? And what kinds of activities are considered illegal advertising/soliciting and what are not? (signs, door-to-door, email, fliers, newsgroups. eBay, classified ads, brokers, talking to strangers, etc.)

 

[Michael Wechsler]

The options you have are for stock in Homestead? If so, then the options are for the sale of equity in Homestead, not in Switchpoint. You have to think if the two companies as being two completely seperate entities. Your restrictions are those in the papers you have and they would be for Homestead, not a pre-IPO company that happens to be 100% owned by Homestead. Weird but that's the way it works with corporations, as though the two are not related. BUT, one can't be sure of any restrictions that may apply without seeing all the paperwork that you have so treat this post (not legal advice) with caution.

 

[Gary_Gummow]

Clarification - stock options

The options are for stock in Switchpoint. Sorry that was not made more clear. Homestead simply owns some amount of actual stock in Switchpoint, and has sold to me options in that Switchpoint stock. Thanks for your reply.

 

[Michael Wechsler]

Have you read any of the fine print or restrictions printed on the options themselves?

 

[Gary_Gummow]

I'm not even sure if what I have is considered a security. It is a one page contract entitled "Stock Option Purchase Agreement." It starts out, "Homestead Investments, a Limited Liability Corporation of Utah (hereinafter "Seller"), wishes to sell an option to purchase directly from Seller, Class B common non-voting stock in AirSwitch Corp (now Switchpoint Networks), a Utah Corporation, owned by Seller as of the date of this agreement. Gary Gummow (myself) of Utah (hereinafter "Buyer"), wishes to purchase an option on said AirSwitch Corp. stock currently owned by Seller." I have no certificates or anything else. Paragraph 9 says "This contract is transferrable and can be reassigned with the consent of the parties." I have been told this means I can sell. I'm not sure if I would be selling an options security, or just a contract or what. But I am told that others with the same contract have been able to sell. My only question is what kinds of advertising activities are legal. There is nothing in the contract about that. Paragraph 8 says "Buyer and Seller acknowledge that this option agreement and this written document memorializing the agreement, in no way, shape or form, constitiute a public or private security offering by AirSwitch Corp." The contract is between me and Homestead Investments which owns the actual AirSwitch/Switchpoint stock, but I wonder if this statement also means that the agreement is not a security instrument -???