An investment through a HK Broad Capital platform will involve risks not associated with other investment alternatives. Prospective investors should carefully consider, among other factors, the risks described herein. These risk factors are not meant to be an exhaustive listing of all potential risks associated with an investment through a HK Broad Capital platform. There can be no assurance that the investment objectives will be achieved, or that there will be any return of capital. An investment through a HK Broad Capital platform is a potentially suitable investment only for sophisticated investors who are capable of assuming the risks of such an investment, including the potential risk of losing all of their invested capital.
These risk factors are not a complete enumeration or explanation of the risks involved in investing through a HK Broad Capital platform. Prospective investors should consult with their own advisers prior to making any decision to invest through a HK Broad Capital platform.
Investing in Technology Companies Through HK Broad Capital
A HK Broad Capital vehicle will be subject to numerous risks generally related to investing in securities and other investments, and the additional risks associated with investing in non-marketable securities and non-public companies. The securities or other interests acquired by a HK Broad Capital investment vehicle will have restrictions on resale and, even in the absence of such restrictions, may not be marketable. The ability of a HK Broad Capital investment vehicle to profit from its investments will be highly dependent upon the ability of its investments to generate income or appreciate in value. Numerous factors may impede or prevent an investment from reaching this point, including inadequate capital, unfavorable competitive developments, adverse legislation at the national, state, or local level, inadequate management or loss of key persons, technology obsolescence, and lack of market acceptance. Investments may face significant capital shortfalls for a wide variety of reasons. Resource development may prove more expensive, or take more time, than anticipated, and the growth in revenues may be slower than expected. Any of such occurrences may result in the failure of an investment and a loss with respect to the investment vehicle’s investments.
No Operating History
Any HK Broad Capital investment vehicle has no previous operating history and will be entirely dependent upon HK Broad Capital, Ltd. as the Manager (the “Manager”). No person should be willing to make an investment in a HK Broad Capital investment vehicle unless such person is willing to fully rely upon the Manager’s ability to effect investments on behalf of such investment vehicle.
General Investment Risks Associated with Investments
A HK Broad Capital investment vehicle will generally invest in shares of common or preferred stock of private issuers. Each of such investment opportunities will entail certain risks that may adversely affect the investment vehicle’s operations and, in turn, an investment in the investment vehicle. These risks may involve, without limitation, general economic risks and volatility associated with such investments, the illiquidity of such investments and a potential lack of recourse with respect to adverse actions by, or associated with, the issuers of shares of common or preferred stock invested in by a HK Broad Capital investment vehicle. The value of the investment vehicle’s investments is derived, in part, from the value of the underlying issuers associated with its investments. Equity securities of private issuers can be highly volatile and expose investors to a high risk of loss. Moreover, there is no exchange market on which to close out an open investment. Consequently, it may be impossible to liquidate an existing investment, to accurately assess the value of investment or to accurately assess the exposure to risk associated with a particular investment. No person should be willing to make an investment in a HK Broad Capital investment vehicle unless such person is capable of losing such person’s entire investment.
No Assurance of Investment Return
The task of identifying investment opportunities on behalf of a HK Broad Capital investment vehicle and managing such investments is difficult. Many organizations operated by persons of competence and integrity have been unable to make similar investments successfully. There is no assurance that a HK Broad Capital investment vehicle’s investment objectives will be attained, or that the value of the investments will not decline, or that there will be any return of capital.
A HK Broad Capital investment vehicle’s investments are expected to be concentrated in a relatively small number of investments and will not be widely diversified. Any investment, directly or indirectly, in a HK Broad Capital investment vehicle should not be considered a complete investment program. Such concentration of risk may expose a HK Broad Capital investment vehicle to losses disproportionate to those incurred by any particular market in general. In the event of a detrimental effect with respect to one or more of the underlying issuers comprising a HK Broad Capital investment vehicle’s investments, such investment vehicle’s overall returns may be impacted much more negatively than they would be if its investments were spread more broadly.
General fluctuations in the economy may affect the value of investments held by a HK Broad Capital investment vehicle. In such event, the ability of a HK Broad Capital investment vehicle to achieve a favorable return on its investments may be severely impeded.
Given the investment objectives of a HK Broad Capital investment vehicle, its investments, by their nature, may be long-term investments. An investment in a HK Broad Capital investment vehicle is therefore only appropriate for investors with a long-term investment horizon and a capacity to absorb a loss of some or all of their investment.
Other Activities of the Manager
The success of a HK Broad Capital investment vehicle will be largely dependent upon the efforts of the Manager. Although a HK Broad Capital investment vehicle will be one of the business activities of the Manager, the Manager will devote such time and efforts to the business of the investment vehicle as it believes are reasonably required to carry out the business of such entities. The Manager and its employees, and other affiliates may engage in other business activities, and the business of a HK Broad Capital investment vehicle may not be such persons’ primary business activity.
Broker-Dealer Sales Fee
The Manager has entered into arrangements with a licensed broker-dealer that provide for the payment of the Sales Fee to such broker-dealer by each investor in a HK Broad Capital investment vehicle. Certain registered representatives of such broker-dealer are affiliated with the Manager and accordingly may be entitled to receive a portion of the Sales Charge. Notwithstanding the foregoing, the Manager believes that the terms of such arrangement are fair to the investors in a HK Broad Capital investment vehicle.
No Right to Control Company Operations
The investors in a HK Broad Capital investment vehicle will have no opportunity to control the day-to-day operations of such investment vehicle, including investment and disposition decisions. The investors must rely entirely on the Manager to conduct and manage the affairs of the HK Broad Capital investment vehicle.
Illiquidity of the Interests; Limited Transferability of the Interests
The membership interests in a HK Broad Capital investment vehicle are highly illiquid, have no public market, and generally are not transferable, except with the consent of the Manager and compliance with applicable securities laws. Voluntary withdrawals of the interests are generally not permitted.
Possible Adverse Tax Consequences
Any HK Broad Capital investment vehicle will be classified as a partnership for federal income tax purposes, and not as an association taxable as a corporation. No representation or warranty of any kind is made with respect to the tax consequences of an investment in a HK Broad Capital investment vehicle, or the allocation of taxable income or loss, as provided in the applicable Operating Agreement. Potential investors are advised to consult their own tax advisors with respect to the tax consequences to them of an investment in a HK Broad Capital investment vehicle.
Absence of Regulatory Oversight
A HK Broad Capital investment vehicle is not registered as an investment company under the U.S. Investment Company Act of 1940, as amended, in reliance upon an exemption available to privately offered investment companies and, accordingly, the provisions of such Act (which, among other things, require investment companies to have a majority of disinterested directors, provide limitations on leverage, limit transactions between investment companies and their affiliates and regulate the relationship between the adviser and the investment company) are not applicable to HK Broad Capital.
Future Regulatory Developments
This document cannot address or anticipate every possible current or future regulation that may affect the Manager, any HK Broad Capital investment vehicle, or their respective businesses and operations. Such regulations may have a significant impact on the Manager and the investment vehicle, including but not limited to, restricting the types of investments a HK Broad Capital investment vehicle may make, or requiring the Manager to disclose certain confidential information regarding its terms, investments, or investors. The Manager, in its sole discretion, may cause a HK Broad Capital investment vehicle to be subject to certain regulations if it believes that an investment or business activity is in such investment vehicle’s interest, as the case may be, even if such regulations may have a detrimental effect on one or more investors. Prospective investors are encouraged to consult their own advisers regarding an investment in a HK Broad Capital investment vehicle.
Lack of Transparency in Investee Company Operations
A HK Broad Capital investment vehicle invests in common or preferred stock in private companies (“Investee Companies”). As Investee Companies are not required to make periodic public filings, certain operational information about the Investee Companies are not available to the investment vehicle prior to investment, including historical financial results and projected financial results, customer and sales data, strategic plans, and management discussion of operations. As a result, such investment vehicle’s investments are made on the basis of publicly available information, which may be incomplete, inaccurate, or not confirmed by the Investee Company.
Investee Companies’ Operations and Financial Results Subject to Various Risks
Revenues and operating results of Investee Companies could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of the control of the Investee Companies and HK Broad Capital. As a result, operational results of an Investee Company known prior to an investment by a HK Broad Capital investment vehicle may vary significantly following an investment. This may result in a decline in the value of an investment in the investment vehicle, including a complete loss of such investment. Factors that may contribute to the variability of an Investee Company’s operational and financial results include: the ability of an Investee Company to maintain an adequate rate of growth; the ability of an Investee Company to attract new customers; the ability of an Investee Company to retain existing customers; the effects of increased competition in the Investee Company’s business and the ability of the Investee Company to compete with competitors that may have longer operating histories and greater financial and operational resources; the ability of an Investee Company to keep pace with changes in technology and its competitors; the ability of an Investee Company to protect its and its customers’ data, technology or other intellectual property from third-party infringement or from misappropriation in the U.S. and abroad; the ability of an Investee Company to defend itself against potential and actual intellectual property litigation alleging such Investee Company of infringement of a third-party’s intellectual property; declines or disruptions in the industries and markets in which an Investee Company operates; the ability of an Investee Company to successfully enter new markets and manage expansion, including expansion in international markets; the ability of an Investee Company to provide a high-quality customer experience through its products and services; the ability of an Investee Company to successfully manage any acquisitions of businesses, solutions, or technologies; the success of an Investee Company’s marketing efforts; and the ability of an Investee Company to comply with applicable federal and state laws, rules, or regulations as well as any rules of applicable networks and associations.
Disposition of Investments
Part or all of one or more investments made by a HK Broad Capital investment vehicle may not be completely disposed of prior to the dissolution and liquidation of such investment vehicle, in the event of which the Manager may make in-kind liquidation distributions to the investors.
Possible Dilution of Company Assets
On occasion, an Investee Company may need additional financing to support operations or growth. It is not certain that additional financing will be available to an Investee Company on favorable terms when required. If an Investee Company raises additional funds through the issuance of equity, equity-linked, or debt securities, those securities may have rights, preferences, or privileges senior to the rights of the common stock held by a HK Broad Capital investment vehicle. Furthermore, an Investee Company may raise additional funds through new classes of stock which convert into common stock on more than a one-to-one basis. This would materially impact the dilutive effects of this issuance on the investors.
Investing in Private Placements
No Investment Recommendations
HK Broad Capital does not make investment recommendations, except when acting as an investment adviser, and no communication through this website or in any other medium should be construed as such, unless otherwise indicated by HK Broad Capital.
Private Placement Investments
Investment opportunities posted on this website are “private placements” of securities that are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by HK Broad Capital, and MAY lose value.
No Regulatory Oversight or Approval
Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website.
No Reliance; High Risk of Loss
Investors must be able to afford the loss of their entire investment. Any financial projections or returns shown on the website are illustrative examples only, and there can be no assurance that any valuations provided are accurate or in agreement with market or industry valuations. Any investment information contained herein has been secured from sources HK Broad Capital believes are reliable, but we make no representations or warranties as to the accuracy of such information and accept no liability therefore. Offers to sell, or the solicitations of offers to buy, any security can only be made through official offering documents that contain important information about risks, fees and expenses. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed on this website, and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity.