In 2009, an ambitious campaign to purchase Pabst Brewing Company was launched by executives at two advertising agencies. Brian William Flatow and Michael Migliozzi II of The Ad Store & Forza Migliozzi respectively, came up with “an interesting experiment in crowdsourcing.”
The duo intended to bring together fans in order to raise $300 million make the purchase of Pabst possible. The concept was simple. Using social media sites like Twitter and Facebook to get the word out, Pabst fans (of legal age) could visit BuyaBeerCompany.com and pledge between $5 and $250,000 towards the acquisition. Investors were not required to transfer funds until the goal of $300 million was reached.
The campaign generated an overwhelming response, gathering about 5 million fans who pledged to invest a combined $200 million at its height. However due to a major oversight, the federal government halted the venture. Flatow and Migliozzi failed to register the public offering with the SEC before they started to sell shares to the public, a violation of federal law. The Securities and Exchange Commission reached a settlement with the two ad execs this week and the pair agreed to stop sales.
The dynamic nature of crowdsourcing allows it to be utilized in new and innovative ways, but this presents new legal challenges to companies and regulating bodies. The attorney for the two ad execs was quoted as saying “it never dawned on them” that they needed to register the offering without any shares being sold.