Pinnacle also examines the business of the company and
its key personnel and undertakes background checks on the
company’s officers and directors which may include undertaking
corporate or litigation searches.
Simply, Pinnacle’s job as an EMD is that of a gatekeeper or
detective to look for ‘red’ and ‘yellow’ flags and then chase them
down until it has an answer as part of its due diligence review.
Internally, Pinnacle puts all its findings and conclusions
in a Due Diligence Report that it presents to a Product Review
Committee that will either accept or reject a deal. A deal could be
rejected but come back for review if certain requests or conditions
are satisfied, but the bottom line is that Pinnacle vets deals to
ensure they are suitable to sell to our investors.
7. What competitive advantages can Pinnacle offer over its
Executive Management Team Pinnacle is uniquely positioned in
the marketplace since we are one of the largest EMDs in Canada.
We have a deal team that includes CFAs, in-house legal counsel
and experienced business analysts that work hard to bring
investors quality deals. Not all EMDs have the bench strength of
Exclusive Offerings In contrast to other EMDs, Pinnacle also
offers exclusive offerings to its investors that are not available
through other EMDs, including offerings that provide immediate
cash flow to investors.
8. What does a typical investment look like? Are there
minimums and maximums?
At any one time, Pinnacle can have up to 20 or more deals
on its product shelf. These include commercial, residential or
development style real estate opportunities, receivables factoring,
short-term lending, lease financing, energy including green energy
and other private businesses experiencing opportunities for growth.
Each deal is different and investors are encouraged to review
the OM of each company’s offering with a Pinnacle dealing
After a deal is approved by Pinnacle, it is on-boarded onto
our system and training modules are set up internally and with an
issuer. After a Pinnacle dealing representative passes a “know your
product” test, they are able to meet with investors to explain and
discuss the offering, including its risks and assess its suitability for
Companies have periodic closings such as every two weeks
or monthly until the requisite amount of capital is raised.
Some companies have to raise a minimum amount of capital
in order to close the transaction, some have maximum offering
sizes (e.g., $20 or $30 million) while others have no minimum
or maximum offering sizes and are a continuous offering. For
example, a real estate offering may typically have a minimum and
maximum offering while a financing involving a factoring company
may be in continuous distribution.
9. How quickly can investors pull their money out?
The speed at which investors can pull their money out
of a private deal depends on the investment. Private market
investments are not as liquid as securities sold by a prospectus
and that are traded on a public stock exchange. In fact, often there
is no readily available marketplace to sell a particular investment in
the private market, however, investors can:
a. Redeem the security in accordance with a redemption process
set out in the company’s corporate documents. This is a
common way to exit many private market deals (see below).
b. Resell their securities under another available prospectus
exemption. For example, an investor that purchased securities
under the OM Exemption can resell it to another investor
under the OM Exemption or an accredited investor under the
Accredited Investor Exemption; or
c. Wait until the term of the investment comes to an end
(assuming the security has a fixed term) for example, an
investor who purchased a promissory note that has a 1, 3 or
5-year term, can get their money back at the end of the that
10. How does the redemption process work?
The redemption process varies by security so investors
should understand how it works since it impacts, among other
things, their investment time horizon.
A redemption process typically requires an investor to provide a
company with a notice of redemption during a redemption notice period
that is prior to a redemption date. Redemptions could be monthly,
quarterly, annually or otherwise as determined by the company.
A redemption payment is made after the redemption date.
Investors need to read and understand any cash limits that a
company may impose on cash redemptions since it limits the
amount of money a company will return to investors. For example,
a company can limit cash redemptions based on a percentage
or flat dollar amount. For example, a company could limit
redemptions to $500,000 per year or 20% of the net asset value
of the company, etc.
Typically, amounts in excess of any limited cash redemption
amounts are paid in redemption notes. Investors generally do
not want to receive promissory notes from a company since they
are looking for cash so sometimes an investor may retract their
redemption request and retain the securities.
The bottom line is that redemptions provide a form of liquidity
for investors in getting their money back, but it may not all be
available in cash immediately upon demand. That is why private
market investments are referred to as ‘illiquid securities’. However,
for investors having longer time horizons, having ready access to
liquidity to sell their investment may be less of an issue.
Investors should also note that some companies charge
early redemption fees if redeemed prior to a certain date (e.g.,
redeemed prior to one year)