What’s with this “Pre-IPO Code” Stuff from Jeff Brown?

Checking out the teaser pitch from Brownstone's Blank Check Speculator

By Travis Johnson, Stock Gumshoe, January 19, 2021

I’ve gotten a lot of questions in the past couple days about Jeff Brown’s “Pre-IPO Code” presentation, in which he teases the idea of this “Pre-IPO” investing strategy as he pitches his new Blank Check Speculator newsletter.

And I’ve got good news… and bad news.

The good news is, I can explain what he’s talking about and answer some of those reader questions, and provide some perspective…

The bad news is, he doesn’t drop any hints about which specific “Pre-IPO Codes” he’s recommending, so we won’t be providing that kind of answer today.

Brown’s offering, by the way, is one of the typical infomercial “hard sell” stories — you’ve got to “get in now,” and he “fought with his publisher” to make sure he could offer it for $2,000 instead of the $4,000 “retail price.” That $2,000/yr comes with few guarantees and absolutely no refunds — the guarantee is that “I pledge to identify a SPAC that combines with a unicorn in your first year of service, or you get another year free” … which I guess is better than no guarantee at all, it means he won’t just take your money and disappear, but it certainly doesn’t mean that Brown has to have a successful year… that might be the easiest promise to keep that I’ve ever heard of in newsletter world. And it certainly doesn’t mean that he’s taking any risk — it remains, of course, only your money, that $2,000 plus whatever you risk on his investment ideas, on the line.

So what’s the deal? The presentation is structured as a interview by Chris Hurt, who is introduced as the Host and seems like some kind of in-depth 60-minutes interviewer but is, as is typical of these kinds of “presentations,” actually an actor — a guy who followed up his career as a Disney tour guide with a career as a self-employed voice over artist and spokesperson-for-hire (according to his LinkedIn profile, at least). Not that there’s anything wrong with that, but I find pricking a little bit of the bubble of silliness that surrounds these ad pitches is useful in helping us to think a little more slowly and deeply about what they’re actually selling.

The basic pitch is that you can be part of the new wave of IPOs, of companies that will change the world, and that you can get in before the IPO excitement and therefore collect massive rewards. Here’s a little bit of the “story” of the kinds of companies that are being created:

“In the Southwest, the world’s first commercial spaceport is ready for launch. In Silicon Valley, a college dropout has all but won the self-driving car race. And in the rust belt, GM has shipped thousands of jobs overseas until… the local plant was saved by an electric truck company.”

And because we’re all primed to believe that the secret cabal of insiders are keeping the best stuff for themselves, we’re primed to believe it when we’re told that these IPOs are shaking Wall Street to its core, and “Jeff Brown says it’s being kept from you.”

Plus, to be even sexier, “there’s a code”… And Jeff Brown says that, “if you know this code, you can invest before IPO day and see the potential millionaire-making names once reserved for the wealthy.” More from the presentation:

“The Pre-IPO code is a new innovation that will let you secure a stake in billion-dollar tech unicorns before IPO day. With the right codes, you don’t need to be an accredited investor, and taking advantage of these kinds of deals could mint millionaires.”

So what do these codes get us?

“The moment you enter a Pre-IPO code and click buy, you’re awarded units — not ordinary shares of stock, I mean units, contractual share of the enterprise you’re buying.

“Back the visionaries, men and women who are bold enough to change the world.”

And that is, of course, all a lead-in to a pitch about Special Purpose Acquisition Corporations (SPACs), which are often also called “blank check” companies. They’ve been around for decades as a marginal part of the investment banking world, with occasional little jolts of interest, but over the past two years or so they have exploded and become dramatically more popular. Jeff Brown insists on calling the lack of public awareness of SPACs a “cover up,” which seems to just be conspiratorial goofiness, but it’s true that they are not often well-understood — even by the folks who got really excited over the past year and started speculating on lots of these stories.

So let me explain SPACs as well as I can, just to make sure you know what you’re getting yourself into, and then I’ll get back into some other examples and notions that Brown shares in the