SHREVEPORT, LA (KSLA) - Nearly a month after Elio Motors launched a crowdfunding effort to raise money, the company is close to their pledged donations goal. However, it is ultimately up to the feds if they'll even get the money at all.
Elio Motors has partnered with crowd-funding website Start Engine to raise money. Equity-based crowdfunding is a new concept made possible by changes in federal regulations, specifically Title IV of the JOBS Act of 2012.
Ultimately, Elio Motors will use the money to build an extra 25 prototypes of the three-wheeled car for testing and validation.
"We are very excited about our relationship with Elio Motors," Start Engine Co-Founder Howard Marks said, and explained their website is different than what most people think crowdfunding is.
"The people who reserve shares in our platform are actually looking to buy shares in the company and align their interests with the company's success," said Marks.
Websites like KickStarter or GoFundMe are donation-based. This type is called "equity-based" crowdfunding, which LSU-Shreveport Finance Professor Tim Vines describes as getting a specific portion of the company's profits.
"It's a lot more like buying a share of stock. It's basically just a cyber-age alternative to buying stock," said Vines.
"In both donations, crowdfunding and equity-based crowdfunding, you are getting something, but with equity-based crowdfunding, you are getting a specific portion of the profits of the company," Vines added.
In a little less than a month, Elio Motors has raised $22.5 million, about 90% of their fundraising goal. But Marks says that amount is only pledged and non-binding. His website is strictly for testing the waters of interested investors.
"To be very clear this is not a money transaction at that moment," he explained.
Elio Motors can't ask to collect the money until the U.S. Securities and Exchange Commission (SEC) approves of paperwork to do so.
"If the document is adequate, I'm sure they will decide to go ahead with it, but again that is their decision," said Marks.
If the SEC gives the green light, Elio Motors will contact those who pledged money and see if they are still interested. "At that point, they (interested investors) can wire money into an escrow account," he explained.
Marks says Start Engine is constantly doing security checks to make sure each entry is legitimate. "We've done some security checks to make sure that these entries are legitimate, they are not done by robot, they are done by a real person, the email address is real and that kind of thing," he explained.
Just a few days, Elio Motors announced several pledges were found to be bogus, which brought their total from more than $25 million back down to around $22 million in pledged dollars.
In March, Elio Motors opened up a different fundraising effort. The main difference from this initiative is $15,000 was the minimum amount people could invest into the company and federal regulations only allowed sophisticated investors with assets equaling $1M to participate.
Elio Motors CEO Paul Elio has said the company will begin production in a portion of the former Shreveport General Motors Plant by mid-2016, should the company acquire the funding necessary to do so.
The public relations firm representing Elio Motors did not respond to our requests for a comment from Paul Elio.