February 14, 2018 | Webinar

2018 Tax Reform and the Private Market

Rohit Kulkarni 00:04

Okay. We are going to go ahead and get started. Happy Valentine’s Day, everyone. Good morning to everybody who’s joining us from the West Coast, and good afternoon for everyone who is joining us from the East Coast. On behalf of everyone here at SharesPost, I would like to welcome you to today’s webinar. My name is Rohit Kulkarni. I’m the managing director of the private research group here at SharesPost. Among other things, I oversee SharesPost’s website content, data, insights, analytics, and research for investors.

Rohit 00:38

Today, I’m very excited to do have with us, Paul Bleeg. Paul is a partner at the tax firm EisnerAmper. We have had a long relationship with EisnerAmper here at SharesPost. And he just told me that he’s been working on taxes for over three decades. And judging by his looks, I think that means he started working when he was in elementary school. He also told me that this is one of the biggest changes in tax laws in many, many years. Almost 20, 30 years. So what we are witnessing right now is something pretty historic. And there are a lot of implications for a lot of people, and investors, and employees at Unicoms, and crypto billionaires or millionaires, and everybody in between. So I’m very excited to pick Paul’s brains. And at the end of, say, 30, 35 minutes, I’m sure that the collective knowledge of our group is going to rise, like how stock market rose because of these tax cuts. And Paul has graciously put together a presentation he will walk through. You will see question and answer text box on your console. Feel free to type in any comments or questions as they go. I will moderate them.

Rohit 02:01

But before we jump into the main part of the webinar, for anyone who is joining us for the first time, SharesPost is a fintech startup. Our headquarters are in San Francisco Financial District. And we believe we are lubricating the innovation economy. We are bringing together shareholders, and investors, and individuals to create liquidity within the private tech growth asset class. And these are a bunch of issuers that we have transacted in. We have been around for more than seven years. Transacted more than $3 billion worth of shares in private companies. And SharesPost research was launched about 18 months back. And we publish company reports; this is just list of all the reports that we have published. We have published a whole bunch of white papers trying to keep on top of the broader movements in private tech capital ecosystem. We also launched the-- what we call is a private growth index in July of last year. And we updated the Q3 numbers in January. And we also do a whole bunch of webinars. We have done more than a dozen over the last year, and we are really happy to kind of educate and feel educated about taxes in the next 35 minutes or so. We talked a lot about market, and just trying to stay on top of what’s happening in the broader market, be it the IPOs, be it VC, fundraising, and what have you. But again, we’re talking about the tax reform and the private market. Without much ado, Paul, mic is yours. Thank you.

Paul Bleeg 03:46

All right. Hello, everybody. We just skip forward to the agenda. I’ll go over what we’re going to talk about today. Mostly, we’ll concentrate on individual income tax changes. Also, an interesting, really, new provision is qualified business income deduction, which allows an exclusion of up to 20% of your income from a past serenity and by pass-through, a lot of people are confused by that. That also includes a sole proprietor. But it’s not just partnerships as firms. A few of the general corporate provisions that are of interest: federal tax deductions, other tax highlights.

Paul 04:29

And skipping to the next slide, here’s the new rates for individuals under the Tax Cuts and Jobs Act. And this is just for future reference, I won’t go over it, but the key takeaway here is that this, like all the other changes that apply to individuals, are temporary. The corporate tax cut is permanent. The individual tax cuts, and there are tax cuts for many, but there are some tax increases for some of us, those are not permanent, those expire. Which is good news I guess if you live in California, Connecticut, New York, where you may see a tax increase from the Tax Cuts and Jobs Act. Middle America is going to see by and large pretty good tax cuts.

Paul 05:22

Here’s the comparisons of the tax rates in effect at 2017 year end, and you can see under H.R. 1, which is the Tax Cuts and Jobs Act, you’ve got reduced rates all across the board. And now, a new top rate of only 37%, down from 39.6%. So ordinary income tax brackets have been collapsed, the rates lowered, and some inside baseball stuff about inflation adjustments, which isn’t that relevant. Cost basis, they were considering making a change in how you allocated your cost basis in different tax slots of shares that you sold. And they threw that out of the Tax Act at the last minute, so that’s good news. Also--

Rohit 06:20

Paul, can you draw that out a little bit more in terms of how that affects or could have affected the cost basis for-- particularly the investors in SharesPost have shares in private companies and stock options. Is there something that we need to keep an eye on, or--?

Paul 06:36

Well, it’s a planning opportunity where you have different tax lots, different acquisitions at different prices. You can minimize your taxes by choosing which of those lots, by specifically identifying to the broker, "I’m selling these shares." And they were going to take that ability away from us. They were going to go to a first in, first out method where you have no decision making in the process. So for people that have a mix of high basis and low basis stock, we can still have some planning opportunity.

Rohit 07:07

Okay, that’s great.

Paul 07:10

On to the next slide, more inside baseball. For the most part, I’ve skipped down to the like-kind exchanges. That’s a big change. Like-kind exchanges now only apply to real property. So trading in your business auto used to be a tax-free event. Whether it was a gain or loss, it was automatically a like-kind exchange under Section 1031. Now, like-kind exchanges under that section will only be limited to real estate and they’ve also, therefore, taken out cryptocurrency, Bitcoin. Many people that traded in that took advantage of the fact that as long as they traded into new Bitcoin or new cryptocurrency, there would be no tax to pay until they converted to cash. There was talk about removing the gain on the sale of your principal residence, or lowering that exclusion in the final analysis did not make a change to that.

Rohit 08:14

So I mean, this is for my personal clarification, not that I’m a big crypto millionaire, but-- so what is the impact of limiting the like-kind exchanges? So can I now-- when I sell [inaudible] buy Bitcoin, is that a taxable event?

Paul 08:33

Yes. Every transaction in Bitcoin or cryptocurrency of any kind is a taxable event, whether you convert to cash or not. If you make a trade from Bitcoin to another cryptocurrency, that’s all taxable now. And that’s based on the fair market value of the cryptocurrency that you get versus the basis of the cryptocurrency that you sold [crosstalk].

Rohit 08:57

Okay. So is the onus-- as in, how do we do the reporting on that? Do you think that’s a potential negative event for companies that manage these exchanges because now they probably need to do more reporting related to transactions?

Paul 09:16

Well, they probably needed to do reporting all along, but it’s kind of a new and evolving industry. But the IRS will get them online to do the reporting. So they’ll be issuing to the government as well as to the trader the annual report showing the realized gain. So we’re just like more of the standard Schwab, E*TRADE regime where you get the 1099-B and realized gain or loss statement at the end of the year.

Rohit 09:47

Oh okay.

Paul 09:50

Going on to the Affordable Care Act, which was promised to be repealed, it was not. The 3.8% tax on that investment income is still in place. The only takeaway here is that the individual mandate where you’re penalized for not carrying health insurance and proving that to the IRS in your tax return, that penalty goes away starting next year. In 2017, if you prepare your tax return, you will be penalized if you did not check the box that you had health insurance for the year. How strenuously the IRS is going to enforce 2017 and check that you didn’t erroneously check the box, I’m not sure. I don’t think they are hardest on that bill. The big change for us in California and in high income tax states is the phase out-- I mean, increased exemption for alternative minimum tax. That combined with almost the elimination of state and local tax, that’s now capped at $10,000, which is a huge change. There’s going to be a whole lot fewer people subject to the alternative minimum tax, so that’s a really big change. Probably, it’s for some of us going to be a tax increase. But I’ve run some numbers, I’ll show you in a little bit, that shows that it can be a tax decrease for some of us.

Paul 11:27

Moving on to the-- this isn’t really an individual item I’ve got up there, but I thought it was interesting that they went after the hedge fund crowd, and that’s actually a large part of my clientele, and they made the-- carry interest term three years. So that means that the holding period of one year or longer, the investors and the hedge fund are still going to get the benefit of long-term capital gain treatment. Except that, gain is allocated to the hedge fund manager, the guy that runs the hedge fund that makes his living at that, it’s going to be short-term, which is going to be taxed at the higher rate. So they’re just trying to get more money out of the Wall Street community, which I don’t believe the administration self-contributed enough and sat on their heels too long before they got behind-- or they never got behind the president. So that’s a little jab at Wall Street I think.

Rohit 12:24

Does that specifically call out kind of hedge fund type investors, or is there a provision there for-- because there was always that debate between venture capital private equity and hedge fund investors who is focused on the longer term versus shorter term and [inaudible] tax.

Paul 12:42

Yeah. That’s a good point. They didn’t do the Draconian measure, which was to make the carried interest ordinary in the cap. So a hedge fund manager will still be at that mix of what his investors get: dividends, interest, long-term gains, short-term gains. They just tweaked it to make it more painful so that more of the long-term gains held between one and three years are now going to be short term, so that’s going to be a tax increase for hedge fund managers. Standard deduction went way up from 13,000 to 24,000 for married filing joint. That’s going to mean a lot fewer people will be benefiting from itemized deductions because they won’t exceed that threshold. And for those people in that bubble, it’s going to be a tax decrease. A tax increase that affects some is that you no longer get personal exemptions, so the more children you have, the less tax you pay. That calculus is no longer a factor in reproduction, if you will. The child tax credit, however, did go up, so there’s still an advantage to kids other than the intangibles.

Rohit 14:06

That would be a longer topic we got to have on Valentine’s Day next month [inaudible].

Paul 14:12

Don’t spoil the mood. Here in the itemized deduction area, there’s a couple key changes. The second too, there’s now a cap on state and local income taxes, your real estate taxes, your personal property taxes that you pay on your car, and your income taxes. All that combined cannot exceed 10,000. So that’s going to be a big reduction in the itemized deductions. But again, with the removal for the most part of alternative minimum tax, because they’ve raised the exemption so high, and because we’ll no longer be in the AMT, many of us might see a tax decrease, kind of counter-intuitive there. There’s a new cap on mortgage interest. Instead of the old rule, which really was a million plus your home equity indebtedness, which was another 100,000. So you could essentially borrow a million one on a home and deduct all of that interest. Now it’s a new limit, 750,000. Old mortgages are grandfathered. I would be careful about refinancing. It can be done. I would just make sure you do it right. You don’t pull money out. You don’t put money in your pocket on a refi, you’ll probably be all right.

Paul 15:35

Moving on to a few other items. The Pease deduction is a phase out of your itemized deductions based on your income. So you start losing your charitable contributions and your interest deduction. That’s gone. That’s good news. All miscellaneous itemized deductions are now gone. That means your union dues, your payment to a tax professional like myself is all out of your pocket. There’s no deduction for that. Your investment expenses, no deduction. You still get your investment interest expense, though. The deduction for alimony has been eliminated. That, again, were grandfathered. If you’re currently under an alimony or a separate maintenance payment system, that’s going to still be deductible. Payments are still going to be income to the recipient, but I’d be careful and talk to your attorney before making any adjustments to that.

Rohit 16:42

Can you repeat, for my sake, clarify what is the Pease limitation? What is that?

Paul 16:47

The Pease limitation was a clawback, a reduction of your total itemized deductions based on how much income you made. So you could have the same amount of itemized deductions, but another $100,000 of income would remove $2,000 of those calculated itemized deductions. So just it’s taking away for every dollar you make.

Rohit 17:09

I see.

Paul 17:10

It’s effectively an increase in the past. A change that affects a lot of people that are doing Roth conversions where they want to undo it because the value of the Roth goes down - that’s kind of inside baseball, but - you can’t undo those. So be aware of that if you’re considering a Roth conversion. Education. 529 plans can now be used for elementary school and a secondary school, not just college. So that’s something you’d want to consider if you have a large 529 plan. You want to start depleting it early. And again, all this stuff expires in 2025.

Paul 17:56

I’ve put together a couple examples of how the individual tax changes affect a few people. And I’m just giving you some examples of a married couple with two children making 300,000. You can see that the state tax deduction in the middle is now limited to 10,000. But even so, after the tax changes in 2018, they’re going to see a savings of $10,000. However, if you’re single and no kids, you’re going to see a tax increase of about 6,700 if you’re making in this income range. So a fair increase for single individuals. And then I’ve noted if you did the same analysis, as the previous slide, if you were married, you would come up with the savings of about $8,000. So definitely kind of encourages marriage in this tax plan.

Paul 19:04

Few ideas for 2018 and beyond in terms of tax planning. One thing people are considering is bundling up their charitable donations and other itemized deductions in years where they will exceed the 24,000. And one tool is using the donor-advised fund where you can make a charitable donation of let’s say 20,000, but you don’t necessarily want to pay that all out. You get the deduction by creating the donor-advised fund, but you can dole that out over a number of years. And so you can even out your charitable giving even though you’re lumping it up for tax purposes.

Rohit 19:48

I think that’s very interesting because last year at SharesPost, we partnered with the Fidelity Charitable for exactly that because if you think about the number of people working in large private companies and pay for [inaudible] to manage their taxes over the next-- under the liquidity of it happens, IPO or an M&A, they can take advantage of donor-advised funds. So just to draw out your recommendation, if there were people holding stock in private companies and looking to take advantage of the donor-advised funds, what should they do?

Paul 20:29

Well, the contribution of appreciated stock to a donor-advised fund is an excellent strategy because if you have a high valuation that you can justify, that’s the amount of your charitable donation. And by donating it, you get the full value without incurring the capital gain as if you sold it in a private market, then took the net cash after taxes and make the donations. So donating highly appreciated stock is-- if you’re otherwise inclined to make that donation, that’s what you should use.

Paul 21:04

Some big changes in the state and gift area, we’ve doubled the-- scroll on the next slide here.

Rohit 21:16

Oh, I’m sorry.

Paul 21:18

They doubled the exclusion from 5.49 million to 11.2 million. I’m very disappointed that this is also one of the individual provisions that expire, but it’s a good time to dive for the next 10 years.

Paul 21:38

Let’s move on to some changes in the-- this new term, qualified business income. So what that is, you take your income from your business, whether you’re a sole proprietor or a partnership or an S corporation. And you essentially get to exclude 20% of that income--

[silence]

Paul 22:17

Businesses don’t pay wages. A sole proprietor, wages paid to yourself, you wouldn’t do that. If you did, it wouldn’t count. So their exclusion will for the most part be limited or zero if they make more than 400,000. If you make less than 400,000, you still get the exclusion. Another interesting aspect to this is certain businesses are excluded or phased out. Attorneys, accountants like myself, if our income is about 415, we don’t get any benefit from this provision. A weird result for this new exclusion is that it may be beneficial to form an S corporation. And before anybody runs out and does that, I’d analyze it carefully. But the play is if you form an S corporation and pay yourself a salary and that salary is reasonable, then that counts towards your 50% exclusion limitation.

Paul 23:32

So if we could skip down to actually the table showing the example of qualified business income. It shows, here is the example, it shows if you have the same income, but instead of $100,000 shareholders salary, you pay the shareholder 200,000, the sole shareholder, you’re going to come up with a tax reduction, a taxable income reduction of $50,000. And you can play with the numbers in your own personal situation, see if it make sense to in fact incorporate an elect S corporation status. So this is a change for the first time where we’re going to be recommending in some cases S corporation formations, which we really been off of ever since the advent of the single-member LLC for years now. Another example, with a even bigger deduction given different numbers results in a deduction of 125,000. Again, no deduction for a sole proprietor in the first column, no deduction for a partnership in the third column, so pretty powerful tax savings opportunity. Again, more inside baseball stuff on the qualified business income, and who qualifies, how the phaseout works.

Paul 25:02

I want to touch on a few general corporate provisions. The big news is that the US-- the federal tax rate is now 21%. That was down from the top rate of 35%, and that also applies to personal service corporations. This new tax rate also puts us in line with-- in the middle of the pack with the rest of the world. We now have a lower rate than China, Mexico, Japan, and France, and we were really the highest in the world among the developed countries. So that’s a pro-business item. Also I’ll touch on, we have the repatriation tax, that’s been also lowered. So we’re seeing companies like Apple and Intel talk about bringing significant amount of money that they’ve been keeping in Ireland and other tax havens. So that will be interesting to see what effect that has on the economy. That will increase our revenues for the short term at least.

Paul 26:08

Few other tax highlights in the new act. All entertainment expenses are now nondeductible. That’s pretty big. That affects my invitations to the Warrior games, which are now going to disappear because my clients are no longer going to get a deduction for paying for the season tickets. If you buy a meal at the Warrior game for your client, that’s still deductible. So the distinction is meals are good, any other type of entertainment is bad. A lot of people lump travel and entertainment together, and travel is not subject to a limitation. That never has been. That’s fully 100% deductible. Meals are 50% deductible, and entertainment is out.

Paul 27:03

Excess business losses, this really applies to entrepreneurs that are in the startup stage. I’ll just not go into detail on this slide, but this does limit the ability of people that are losing real money in a startup to use that loss to offset against their other income from other sources, capital gains, other business income. So that’s an anti sort of business formation provision, I think. More stuff on that in the next slide.

Paul 27:35

For the depreciation deductions, I just want to point out that there’s higher limits now for luxury autos. So entrepreneurs that have a business auto, these deductions have gone up. They’re more reasonable. They’re not limited to what was a very low luxury car limitation. And here, there’s still the heavy car SUV exception. If it weighs over 6,000 pounds, I believe, you’re not subject to the luxury car limitations. That’s it at a very fast-paced, high-level overview. And we’re on time and under budget.

Rohit 28:21

Okay. A couple of questions. One that came through this chat [inaudible] here is on this like-kind exchanges and the effect of those on cryptocurrency trades. Is that effective as of January 1st, 2018, or is it retroactive?

Paul 28:46

It is not retroactive. It is effective Jan. 1 of ’18. So you’ll still be filling out the like-kind exchange form. And the number escapes me, but you should report your cryptocurrency trades on that IRS form, and you won’t pay tax in 2017.

Rohit 29:06

Okay. And one more question that came up on this repatriation of cash that the large companies may be more willing to do. Can you just draw that notion a little bit further? What does the economic incentive now offer?

Paul 29:25

Well, before, you would plant your foreign subsidiary in Ireland and pay maybe a 7% rate there on your income from sales into Europe. So you would gain the system by selling your computers at a low cost to Ireland subsidiary. They would sell it to the European distributors at a high markup, so you capture more profit in Ireland. And then you’d leave that profit there, or you’d loan it to your other European operating subsidiaries, but you would never bring it back into the US. If you did bring it back, it would be taxed by Apple or Intel at 35% rate, federal rate, plus California. So there was a huge incentive to leave that money offshore. Now they’ve lowered that repatriation-- they’ve made a separate rate on repatriation of foreign income. That is, I think it might be 15%. I didn’t really prep for the corporate side, but it’s no more than 21%, and I think it’s 15%. So it’s a huge incentive for these companies to generate operating capital by bringing that money back and paying that one time-- tax it on the foreign earnings that they’re bringing at.

Rohit 30:52

Okay. Yeah, because the notion, again, you brought it out how that affects or could affect the investors on our, SharesPost’s, platform is the long-term investors focus on two liquidity events, M&A or an IPO. And increasing amounts of cash feedback created by large tech companies probably increases likely of them going out to buy some companies out there, near the Valley or any other tech startups which becomes a net positive I think for a lot of private companies out there.

Paul 31:29

I would agree. I think that will be a side benefit, more liquidity in the private capital market.

Rohit 31:36

Yup. One more question that has popped up is about the gig economy and shared economy. As in, a lot of people who drive for Uber, or a lot of people who rent out a house for Airbnb, or drive for companies like Postmates and things like that, is there any tax incentive for such part-time, single kind of part-time contractor workers who are participating in the gig economy that were large numbers of how many people are in that bucket who essentially are only jumping around doing part-time contractor work for Uber or Airbnb or Postmates or Doordash, so on and so fort.

Paul 32:27

I don’t see any huge benefit to being a gigger. I think it’s still as-- under the old law, it’s the same. If you can become an employee, have a mix of [inaudible] options, have your health insurance paid, you’re going to come out ahead. Independent contractors working for Uber, they’re not going to get any part of that 20% pass-through income deduction because they don’t have salary. So I don’t see any positives in the new offer other than reduced tax rates, and increase on the standard deductions, which I think will help people at lower income levels pay lower tax. But given the choice of earning the same money as an employee versus a gigger, I would always choose to be an employee. It’s a better economic choice.

Rohit 33:20

Okay. Okay. Yeah. We are just going to be pulling for more questions, but again, there are a lot of topics to cover. A couple of questions we have received are more specific to people’s tax situation, so we will leave them right there. I guess, we’ll-- but this has been super duper informative. Any other broader things that we should highlight? But I think this was super informative [crosstalk].

Paul 33:51

Well, I would keep the Tax Cuts and Jobs Act in mind when-- if you’re preparing your own returns, some of the tax software is going to have the ability for you to enter information into the program to tell them, "This is what might qualify as a passthrough deduction in 2018." And some of the software - I don’t know about TurboTax and that’s one that a lot of people use - will do an analysis of what your tax savings will be in 2018, given the same facts as 2017. And then I’ve been running that analysis since I’ve been finishing some tax returns early in tax season. And I’ve got to say, I’m surprised, we all thought that this tax act had a big bull’s-eye on California, New York, and Connecticut. I’ve been surprised that with my clients in the 600 to 1 million dollar range, I’m not seeing a tax increase. I’m seeing a tax decrease. Everybody’s facts are different, but so far, I don’t think it’s the disaster that I thought it was going to be.

Rohit 35:10

Okay. Great. I think we will probably wrap it up right there, Paul. Thank you so much for your time today, and thank you to everyone for joining in. Yes. As you will see in the screen, that’s my contact information, if you have any further questions. And many people have requested access to the webinar presentation as well as Paul’s slide deck. We will be sending a follow-up email to everyone who joined in right now as well as many more people have registered, with a replay, a transcript, as well as a way to download the slide deck. Again, thank you so much for joining us today. We are always looking for topics and speakers. Taxes is something that is out of mind for many people at Sharespost, as well as the investors on Sharespost. So again, Paul, really appreciate this. I know there were a lot of topics to cover, but I think we are much, much more smart in the last-- right now than what I was 40 minutes back. So again, from everyone here in Sharespost, hope you get inspired, spend sometime with your loved ones, and not just think about taxes because those aren’t going away. But anyway, thank you, and I hope everyone has a good rest of the week.

CONFLICTS:

This report is being published by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management, LLC., an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc. SP Investments Management, LLC is the investment manager of the SharesPost 100 Fund, a Registered Investment Company, and other funds. These entities and funds (hereafter “SharesPost”) does, seeks to do business with, owns and/or seeks to own positions in the companies covered in this research report. Consequently, investors should be aware that SharesPost has a conflict of interest that could affect the objectivity of this report. This report was originally prepared and distributed to institutional and certain private clients of SharesPost Financial Corporation. Recipients who are not market professional or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell or a solicitation of an offer to buy or sell any security and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation or sale would be unlawful under the securities laws of any such jurisdiction.

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This report does not contain a complete analysis of every material fact regarding any issuer, industry or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable, however, we cannot guarantee the accuracy of all such information. Any securities offered are offered by SharesPost Financial Corporation. SharesPost Financial Corporation and SP Investments Management, LLC are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions. Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk and should only be considered a long-term investment.

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Contact

For information on research and analysis

Rohit Kulkarni
Managing Director
Private Investment Research Group
(650) 300-5128
Email
CONFLICTS:

This report is being published by SharesPost Financial Corporation, member FINRA/SIPC. SharesPost Financial Corporation and SP Investments Management, LLC., an investment adviser registered with the Securities and Exchange Commission, are wholly owned subsidiaries of SharesPost, Inc. SP Investments Management, LLC is the investment manager of the SharesPost 100 Fund, a Registered Investment Company, and other funds. These entities and funds (hereafter “SharesPost”) does, seeks to do business with, owns and/or seeks to own positions in the companies covered in this research report. Consequently, investors should be aware that SharesPost has a conflict of interest that could affect the objectivity of this report. This report was originally prepared and distributed to institutional and certain private clients of SharesPost Financial Corporation. Recipients who are not market professional or clients of SharesPost Financial Corporation should seek the advice of their own personal financial advisors before making any investment decisions based on this report. None of the information contained in this report represents an offer to buy or sell or a solicitation of an offer to buy or sell any security and no buy or sell recommendation should be implied, nor shall there be any sale of these securities in any state or governmental jurisdiction in which said offer, solicitation or sale would be unlawful under the securities laws of any such jurisdiction.

This report does not constitute an offer to provide investment advice or service. Registered representatives of SharesPost Financial Corporation, do not (1) advise any member on the merits or advisability of a particular investment or transaction, or (2) assist in the determination of fair value of any security or investment, or (3) provide legal, tax or transactional advisory services. Information regarding companies in the SharesPost 100 List available on the website has been collected from or generated from publicly available sources. The availability of company information does not indicate that such company has endorsed, supports or otherwise participates with SharesPost. Company “thesis” are the opinions of SharesPost and are not recommendations to buy, sell or hold any security of such company. Investors should be aware that the SharesPost 100 Fund (the “Fund”) may or may not have an ownership interest any of the issuers that are discussed in the report at any given point in time. Accordingly, investors should not rely on the content of this report when deciding whether to buy, hold, or sell interests in the Fund. Instead, investors are encouraged to do their own independent research. Before investing in the Fund, Investors are cautioned to consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus with this and other information about the Fund, please visit www.sharespost100fund.com. Read the prospectus carefully before investing.

ANALYST CERTIFICATION:

The analyst(s) certifies that the views expressed in this report accurately reflect the personal views of such analyst(s) about any and all of the subject securities or issuers and that no part of such analyst(s) compensation was, is, or will be, directly or indirectly, related to the specific views contained in this report. Analyst compensation is based upon various factors, including the overall performance of SharesPost, Inc. and its subsidiaries, and the performance and productivity of such analyst including feedback from clients of SharesPost Financial Corporation and other stakeholders in our ecosystem, the quality of such analyst’s research and the analyst’s contribution to the grown and development of our overall research effort. Analyst compensation is derived from all revenue sources of SharesPost, Inc., including brokerage sales.

DISCLAIMER:

This report does not contain a complete analysis of every material fact regarding any issuer, industry or security. The opinions expressed in this report reflect our judgment at this date and are subject to change. The information contained in this report has been obtained from sources we consider to be reliable, however, we cannot guarantee the accuracy of all such information. Any securities offered are offered by SharesPost Financial Corporation. SharesPost Financial Corporation and SP Investments Management, LLC are wholly owned subsidiaries of SharesPost, Inc. Certain affiliates of these entities may act as principals in such transactions. Investing in private company securities is not suitable for all investors. An investment in private company securities is highly speculative and involves a high degree of risk and should only be considered a long-term investment.

You must be prepared to withstand a total loss of your investment. Private company securities are also highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and you should complete your own independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or other investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment. SharesPost, the SharesPost logo, My SharesPost, SharesPost Index, SharesPost Investment Management, SharesPost 100 Fund, and SharesPost 100 List are all registered trademarks of SharesPost, Inc. All other trademarks are the property of their respective owners.