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But investing at the pre-IPO stage can involve significant risk for investors. And pre-IPO offerings targeted at the general public — especially those that are publicized through "spam" e-mails — are often fraudulent and illegal. Consider the following:
- The Offering May Be Illegal – Any company that wants to offer or sell securities to the public must either register the transaction with the SEC or meet an exemption. Otherwise the offering is illegal, and you may lose every penny you invest. The most common exemptions include those found in Regulation D of the Securities Act. But to meet these exemptions, the company and its promoters generally cannot advertise the offering or make solicitations to the general public.
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