Angel Studios' $220 Investment EXPOSED

Investment isn’t just about stocks - it can mean IPOs, SPACs, or the new wave of Regulation A offerings. In this episode, I break down how these capital-raising methods work, why Regulation A is gaining traction, and the hidden risks investors need to know. From slick marketing to limited liquidity, I show why awareness is critical before buying into the hype.

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Chapters🕓
00:00 - What does “investment” really mean?
00:52 - Why regulation became necessary after 1929
01:39 - IPOs explained: How companies go public
02:54 - The SPAC craze: shortcut or scam?
04:06 - Enter Regulation A offerings
05:45 - Case study: Pacaso’s slick marketing
07:48 - Liquidity risks every investor should know
09:11 - Case study: Angel Studios’ Regulation A pitch
12:02 - Why big players avoid these deals
12:21 - The red flags hidden in the fine print
12:42 - Final thoughts: awareness over hype

Transcript

>> Wes Cuprill: 0:00

What does investment mean to you? What comes to mind when you hear the word investment? For me, the first thing that comes to mind is to take your savings and invest it in the stock market for long term growth. I would imagine a lot of people have that same mental model. Investment can mean many different things. Could mean a company investing in a new factory, or it could mean somebody taking $10,000 and investing it in their friend's business idea in exchange for 10% of future profits. Investment is very, very, there's a lot of opportunity for confusion as a result of how broad investment is. And because of this opportunity for confusion, I think it gives companies the ability to kind of push investment opportunities in a way that make them seem way more promising than they are. After the crash of 1929, you had a lot of legislation get passed by Congress in an attempt to regulate the investment markets. You had the EST establishment of the SEC and you had a whole bunch of regulations about how companies could promote investment in them. And for good reason. This was to protect the average investor. The bigger company is, the more regulations that they have to follow. As much as I am for a free market economy, as we have seen, there are plenty of crooked individuals out there who are after your money. So I think more and more regulation is necessary when things do happen. One of the pieces of regulation that that is in place revolves around, a company's ability to generate investments. Let's use the example of an initial public offering. Let's say you have a company that has been established for a little while and they want to raise a large amount of capital. Typically what they will do is they will do what's called an initial public offering. They will hire a company like Goldman Sachs to underwrite the process. Goldman Sachs will do all of their due diligence. Tank has once again heard something outside and feels the need to protect. But Goldman Sachs will do their due diligence and then what they'll do is they will underwrite the going public offer. So Company X will all of a sudden go public for a million shares at $10 a apiece and they'll raise money that way. There is a very lengthy process that goes into Company X being able to go public. They have to clear a lot of hurdles. They have to disclose a lot of things and for good reason. But ultimately it means that when Company X goes public, people have a better understanding of what it is that they're investing. And because of all this regulation, it can be hard for a company to go out and raise all of the capital that they would get from an initial public offering. So over time, we have seen different alternative avenues come about for a company to raise capital. I don't know if you remember a few years ago, there was something called a special purpose acquisition company that was all of the rage. This is around 2019, 2020, if memory serves me correct. SPACs, they rec called. A group of investors had pooled money together. They listed on the stock exchange a company that did absolutely nothing. It's just a shell. And what this special purpose acquisition company would then go do is buy a private company that wasn't listed on the stock market as a way to indirectly take that company public. It was a way to circumvent a lot of the regulations and requirements around filing for an initial public offering. Now, some of these spacs were successful. They took companies public that proved to be good investments. A lot of them were not successful. Many investors lost money. If they were lucky, they just broke even. So one could argue that there was a reason behind all of the regulations behind filing for an ipo. now the SPAC craze has cooled down in recent years, but now all of a sudden, I am seeing a new fad in terms of an investment opportunity for a company to go sort of public. What I'm talking about are called regulation A offers. I'm not going to get into the nitty gritty detail of regulation A offers, but essentially they are a way for a company to raise a good amount of money by offering shares of the company to the general public. There's a lot less filing that is required for a regulation A offering, and you're able to raise money directly from the general public with an ipo. One of the biggest criticisms is that general investors aren't able to get in on the ground floor of initial public offerings. When Goldman Sachs goes out and underwrites the public offering for company X, they typically go to large investors. And those large investors are the ones who gobble up the shares first. Then usually if there's leftover shares, Goldman Sachs eats those shares rather than them going out to say, you know, Mr. And Mrs. Smith from Omaha. But with a regulation A offering, there's a threshold to the amount that a company can raise. But what they're able to do is go out and raise money from the general public, circumventing a lot of the regulation around an initial public offering. The skeptic in me starts to set in and I start to wonder, well, why hasn't this company been able to go through the Trial and true typical routes towards raising capital. So I've now seen it twice. Companies that have been advertising their Regulation A offering. The first one that I talked about a few months ago is a company called Picasso P A C A S O. I was made aware of this company by a client of Arts who sent us a newsletter that had an advertisement in it, a very well disguised advertisement to invest in Picasso. And you piqued my interest. So I clicked on it to learn more. So Picasso is essentially a new age timeshare company. You can buy fractional interest in a vacation home. It's like they merged Timeshares Technology and Airbnb together into one. They were promoting their Regulation A offering to anybody who wanted to go in and invest in them. I think their minimum investment is like $1,000. And they were trying to raise 56.3 million was their funding targets with this Regulation A offering. And so I'm looking, I'm going through it, and you know, they have a website out there. In fact, you can go to invest.picasso.com do again, that's PA A C A S O. And you can click a button and invest directly in Picasso. And they have a very slick website here. But again, as I'm reading this, I'm like, all right, where's the catch? And I'm going through, and I see this graph here around, just over halfway down to it's the bottom, and it says 110 million in gross profits. And they have a graph that shows starting in 2021, 29 million, 2022, 73 million, 2023, 88 million, 2024, 110 million. And the way they present this graph, it's like their gross profit every year is going up. So they make it seem like in 2024, their gross profit was 110 million. But they very slickly put right underneath it, this is cumulative gross profit. So since they're beginning, they have made 110 million in gross profit. And that's gross. That's not net. So there's a lot of other things that factor in before net profit is calculated. So again, I'm looking at that like, all right, well, they're already skewing their numbers and trying to make this look pretty. I don't want to necessarily say fool anybody, but sort of stretch the truth. And then let me take a step back here. When you invest in the stock market, you can then immediately turn around and sell your investment with the hopes of making money, of course. But there is what we call liquidity. There is the ability to buy shares of a company and then very quickly turn around and sell those shares of the same company for cash. The ability to turn that investment back into cash is called liquidity. So with any investment, we wonder, what is the liquidity of it? And when I was researching Picasso, one thing very much caught my eye. They do have a frequently asked question section, and it says, how will I get a return on my investment? There's only two ways. So if you buy into this, you can't sell. There's really no way then to get your money back. There's only two, one of which is if Picasso goes public through an initial public offering, again, huge regulations for that. And that assumes that they continue to be successful and head in that direction. And then two, through acquisition. If Picasso is acquired by another company, you would get some proceeds from the buyout. But that also assumes that Picasso sells for at least the amount that they are valued at. So if you buy in now, whatever that valuation is, you're getting that fractional percent interest ownership. But if they sell for undervalue, you're gon toa end up losing money. But ultimately, again, if you invest in Picasso right now, your money's essentially locked up. All right, so that's Picasso. And I thought when I talked about this a few months ago, it was the only one that I'd see. Then all of a sudden I started seeing advertisements for another one. And what really shocked me about this one is that it's a company that really pushes itself as a Christian organization, or at least an organization that funds Christian focused products, if you will. The company question is Angel Studios Inc. They were involved in the show that chosen, if you're familiar with that, it was a show about Jesus and his apostles. And so Angel Studios is now promoting their own regulation A offering. You can go and invest $20 minimum into Angel Studios. Now, I will give them a little bit, more credit compared to Picasso. Under their section about, you know, the liquidity and the ability to make money from this, they're a little bit more clear that, hey, your money's kind of locked up here, and this is more to kind of help us grow out. It's almost sort of like a donation, if you will, with the potential that you could make money in the future. Yeah, angel does have plans to become publicly traded, and you would be able to then sell those shares if they do become publicly traded. But again, there's no liquidity to this regulation A offering. And then looking at it too. They also have a website that kind of skews the numbers. They're doing a comparison to Netflix before they went public. I'TALKING about how angel has X number of active paying subscribers and saying that when Netflix went public, they had 600,000 subscribers compared to angel at 1.5. I mean, we're talking, you know, apples to oranges here kind ofus. I mean, when Netflix went Publican had 600,000 subscribers. This was at the very beginning of streaming. They were really reshaping the industry and I think people recognize that and the potential down the road. Whereas with Angel Studios, it's a bit of a different game. They're not reshaping the industry, they're just producing content that is, I would say, different compared to what you see on the mainstream providers. I'm talking about all of this simply to raise awareness. I am not trying to necessarily knock Picasso or Angel Studios for doing this. I am simply just trying to let you know about the risks involved in these things. What I don't like is that these companies are putting out these slick advertisements with these nice landing pages in an attempt to sell you what may seem like this cool get in on the ground floor offering. Like anything, there is a catch. We're already against stock picking. We would be more comfortable with you going to the roulette table and putting money on a specific number. It's very much the same here. The biggest problem with this compared to stock picking is that there's no liquidity, there's no ability to invest and then turn around and sell it. I'm not trying to knock investment. I am very much all about investment. I mean, that's a whole point, behind a company being able to grow, somebody has to take risk and invest in, it. Here's a thing though. With IPOs and companies that go the traditional routes, the big investors will look at it and go, okay, that seems like a good idea. Let me invest my money in it. There's a reason why the average investor isn't able to get on the ground floor. It's a good offer. So the institutional investors are the ones getting in first. So when it comes to this regulation offering, it makes you kind of wonder all, right, why didn't the bigger players want a piece of this? Why aren't they the ones investing? So it kind of raises, suspicions and questions around the viability, or rather the long term viability of the operation in question that is raising the regulation A offering. So again, this is an episode about awareness. To tell you about it, if you see these advertisements now you know a little bit more but if you have more questions if you see something like this please let me know and and I would love to talk to you about it. Plus if you see other companies offering this I want toa know because I really wantn to get an understanding of how common this actually is. So far I'm only seeing two so it doesn't appear all that common yet but it does kind of strike me as the beginning of the new craze that the S PAAC followed or the SPACs Special Purpose Acquisition companies. Is this the latest trend in trying to make money a different way in the financial markets? that being said I hope this was informative and again if you have any questions or concerns about this or any other company offering a regulation A or you just want to talk more in general feel free to shoot me a note or go to visitwithm.com do look a day and time that works best for you. Thanks and take care.