One of the largest raises in equity crowdfunding history won't see the light of day.
Republic, one of the largest equity crowdfunding portals in the United States, launched the "Metaverse Property Fund" in March 2021. The fund was initially only available to a select group of accredited investors. However, in December of the same year, Republic launched a Test the Waters (TTW) Regulation A campaign, allowing all investors to participate. The campaign was a hit, and the entire $75 million reservation limit was reached in a short amount of time.
The Metaverse Fund focuses on purchasing virtual real estate in NFT games such as Decentraland, Axie Infinity, and Sandbox. The fund's strategy is to buy the virtual land and hold it long-term while developing it into virtual shopping centers, event spaces, and other communities. These communities can generate "rent," similar to real estate, and provide ongoing income to the fund's investors. As the value of the metaverse land increases, investors can sell it for a substantial profit.
The fund's impressive performance likely attracted the $75 million in investments. According to Republic, the fund returned 145% on invested capital between its initial launch in March and the Regulation A raise in December.
However, the fund's fortunes took a turn for the worse in the months following the successful raise. Cryptocurrency-based assets have plummeted since their 2021 highs, and the Securities and Exchange Commission (SEC) has been cracking down on the space since the FTX collapse. As a result, the raise has been in limbo, unable to accept investors' funds since December 2021.
Now, the SEC has officially shut down the campaign. In response to the news, Republic stated, "Based on the feedback we received from the SEC as well as other regulatory events that have transpired since we began this process, we no longer see a path forward for this offering. Unfortunately, that means that as of now, the offering will be canceled…We are working on making the necessary adjustments to eventually bring a similar offering to market."
Although the fund's performance has likely declined since its 2021 highs, it does not appear that the fund itself will be shutting down. Instead, the Regulation A offering has been canceled, and Republic may explore other options to continue the fund or offer similar investment opportunities in the future.