Risks of Securities Investing
I. General Risks When Investing in Any Equity Security.
Buying an equity security means you have an ownership interest in the company. Like any equity security (stock), the shares purchased through the LOYAL3 platform may increase or decrease in value (and could even potentially lose all their value). Each Company making a direct offering of stock provides a prospectus that describes the terms of the offering, including risk disclosures, as well as ways to obtain more information about the Company. Please read the prospectus carefully before investing. If the stock is being made available directly from LOYAL3 in its role as a broker-dealer and there is no prospectus, additional terms and risk disclosures are available in the LOYAL3 Brokerage Account Agreement.
Electronic Document Delivery
By purchasing stocks through LOYAL3, you agree to receive electronically all communications from the issuing company and LOYAL3 -- either via email or email notification to access online information (except when the issuing company or LOYAL3 is required to provide the option for non-electronic communication or documentation by law or regulation at your request). The only way to get paper copies of these communications will be to print them from a computer. Regular and continuous Internet access is required to access all communications relating to shares in the LOYAL3 Account. Do not invest through the LOYAL3 platform if you do not have regular and continuous Internet access.
If you revoke your consent to electronic delivery in order to receive paper copies of these communications, that will constitute a request to close your account. You can liquidate the shares held in your LOYAL3 brokerage account and transfer the funds to your bank account or you can transfer the shares from LOYAL3 to another financial institution that makes those communications available through non-electronic means. Any such revocation will be deemed effective as of the date of the transfer and shall not affect any such communications previously delivered by the issuing company or LOYAL3 or pertaining to transactions or matters occurring prior to the transfer.
II. Individual Stocks.
As with any investment, you will want to consider stock purchases in the broader context of your investment objectives and financial circumstances, including your other investments, your savings, and your assets' characteristics in terms of their diversity or variety (to avoid the problem known as "putting too many of your eggs in the same basket"), as well as the relative risk of loss related to each. You should also understand that familiarity with a brand is not the same thing as understanding the value of a company's securities and whether the value may increase or decrease over time. LOYAL3 does not provide any investment advice. Please consult an investment professional with any questions you may have.
Purchases Timing & Batch Trading.
Your purchase orders for stocks (other than for IPOs) are placed only after LOYAL3 has received validated funds, so the stock prices related to your order may have changed significantly since the placement of your order. The time between placing a buy order and the time of the execution of that order could be three to four days or possibly longer.
In addition, by investing through the LOYAL3 platform, you understand that your orders are not placed on a real-time basis, but are batched with other orders placed that day. Batch Trading is a process in which trade orders are collected and then executed all at the same time. There may be an occasion, e.g., during a high-volume trading day, when two or more execution batches will be created. LOYAL3 utilizes this process to provide an efficient way to execute a high volume of potential fractional share orders.
Sell orders received before 2:00PM ET will be batched and executed that day, and orders received after 2:00PM ET will be executed the following day. This may increase investment risk in a volatile market given that the price at the time you placed your order may differ significantly from the price you receive, which may result in significant differences, up or down. Because we use batch trading, our platform may not be appropriate for short-term investors who wish to "time" their buy and sell orders.
III. Initial Public Offerings ("IPOs").
There are specific risks in investing in an Initial Public Offering ("IPO"), where, among other things, a stock has not been subject to market valuation. Those risks are described at length in the enrollment site for any IPO offering available through the LOYAL3 platform. Many of the risks of investing in IPOs are summarized below:
(The risk factors listed below should be read in conjunction with the other risk factors described in the section of the issuing company's prospectus entitled "Risk Factors," where the company describes risks related directly to the company and its IPO)
IPOs are Not for Everyone
An IPO is the first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.
IPOs can be a risky investment. For even experienced investors, it can be difficult to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.
In addition, IPOs are designed for investors making relatively modest investments over a longer time horizon, rather than investors who may desire to trade large volumes to take advantage of potential short-term changes in stock prices, where response time and the ability to quickly execute market orders are crucial.
In general, companies offering IPO’s under Regulation A may tend to be at an early stage of development; the company’s business, product or service may not have achieved market acceptance, and the company may lack a track record of performance over a sustained period of time. In addition, the offerings may be of a smaller size than traditional IPOs, and even if the securities are listed on an exchange, they may be less liquid than those of larger, well-established companies, and trading patterns may be more sporadic or volatile. For these reasons, Regulation A initial public offerings may be considered speculative.
Risks of Batched Order Processing
You are free to sell your shares acquired through an IPO, but sales will be effected in the same manner as sales of any other individual stocks on the LOYAL3 platform: on a daily batched or combined basis. (See discussion on batched sell orders in Section II, above.)
That means that the sale price an investor receives may differ, perhaps significantly, from the market price of the shares at the time that their order was placed. Because the rapid stock movement up or down or "volatility" is often greater for shares recently offered in an initial public offering, this risk may have particular significance in the IPO context.
Conditional Purchase Orders Are Binding
In an IPO, you will make a conditional order or reservation, which you may cancel at any time prior to the decision deadline after the final IPO price has been made available to IPO participants. Under some circumstances, you may be required to reconfirm your conditional purchase order or reservation that you have placed. However, if the final IPO price is within a particular price range, you are legally bound to purchase the shares indicated in your allocation, unless you cancel the order prior to the decision deadline. Once the decision deadline occurs, you will be deemed to have confirmed the reservation.
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