JOBS ACT Unintended Consequences: Already-Public Companies Reaching Out For More Cash blog update courtesy of extracts from the WSJ story “Rules Eased For StartUps Benefit Older Companies”

But another breed of company is angling to benefit from the Jumpstart Our Business Startups Act: freely traded firms, a few of which have been operating for a long time.

Salon Media Group Inc., SLNM -21.05% a 19-year old financially fighting Internet media business, and Giggles N Hugs Inc., GIGL 21.28% a seven-year old food-and-play-space chain, are among dozens of publicly traded companies that have signaled they intend to solicit investors using the new independence in the JOBS Act. Both trade on the over-the-counter market, and auditors have raised worries about their capability to continue operations.

The businesses are seeking new investors using some of the JOBS Act that lets small-scale private businesses advertise to affluent people, known as “accredited investors,” changing an 80-year old “general solicitation” marketing prohibition designed to safeguard investors.

The companies’ use of advertising independence meant for young start-ups exemplifies how a surprisingly extensive array of players expect to obtain an advantage under the brand new law. “You can place it in the class of unintended effects,” says New York securities attorney Douglas Ellenoff, referring to using the JOBS Act by publicly traded firms. “The entire purpose” of the law “was to allow it to be simpler for private companies to raise money,” he adds.

However, the usage of the brand new rules by publicly traded firms “is totally permissible,” says John C. Coffee Jr., a professor of securities law at Columbia University. He also says he does not see “any damage” in the use of the new rules by publicly traded companies.

Up to now, more than 1,600 businesses–including three dozen publicly traded ones–have signaled their intent to take advantage of the new advertising liberties, according to filings made with the Securities and Exchange Commission between Sept. 23, 2013, and June 30.

Other businesses, including San Francisco-based social media business Twitter Inc., TWTR -1.89% used other provisions in the JOBS Act to their advantage in the past. For instance, in 2013, Twitter used a group of rules in the law that permit growth businesses with up to $1 billion in yearly sales to file private filings in connection with an initial public offering. Twitter kept under wraps details about its profitability as well as the type of threats it confronted until about three weeks before it pitched its stock to investors in the process.

Salon, which now has a market valuation of less than $30 million, has another plan in utilizing the advertising liberties supplied by the brand new law. In-depth fiscal information together with the SEC has filed because it went public 15 years past. Lately, it lined up a third party fundraising platform, Deal Labs Inc., to send e-mails to 80,000 prospective investors describing Salon as an “award winning on-line news Website” with more than 17 million users. “Please see the specific risks,” reads one line in small type in the base of the e-mail that directs investors to the info about those threats.

Among those dangers: Salon’s present auditors have, since 2011, warned that they have considerable uncertainties about the organization ‘s capability to carry on its operations, citing problems such as the history of losses of the company’s. Salon went public in 1999 at $10.50 a share and is now selling stock at 25 cents a share.

Salon’s SEC filings reveal that 29% rose compared with a year before to $900,000 in the quarter ended June 30, while sales was flat. Salon CEO Cindy Jeffers attributes General Motors Co. GM -1.99% ‘s go to cut back on a planned ad campaign.

“It makes sense” for an organization that runs a Web site covering politics, entertainment and other subjects “to use all the advanced technologies,” she says of the choice to raise cash online. In the last two years, Salon has experienced “unprecedented increase” in the amount of “unique visitors” to the website, she includes, as well as a successful stock offering will fuel an expansion that “will lead us to profitability.”

One review of the Salon offering states that it’s up to now raised $1 million of the $3 million it seeks, but it does not note that the amount represents a dedication from Salon Chairman John Warnock, a cofounder of Adobe Systems Inc. Mr. Warnock has funneled nearly $14 million into the business over the last five years, Salon says. The omission is “to be respectful of John,” says Deal Labs Chief Executive Aaron Travis. Salon’s “traffic is growing rather unexpectedly since Cindy Jeffers took over as CEO,” says Mr. Warnock. “All the signs for me are favorable.”

Salon and Deal Labs are “in dialogues” with about 20 prospective investors, including a handful that have made verbal commitments to put money into the offering, Mr. Travis includes. A fee collects in the quantity raised.

Giggles N Hugs, the Los Angeles-based family-restaurant chain, this month e-mailed about 20,000 customers with “Chance to invest” in the subject line. “We trust that you, our faithful customers, will participate in our growth goals and become stockholders,” Joey Parsi, the business’s creator, wrote in the pitch.

In the year 2012, he says, he united Giggles N Hugs because he believed being people with a publicly traded firm that had no businesses would make fundraising easier. Instead, he says, the small-scale firm found itself in a fundraising “no man’s land.” Giggles N Hugs lost $984,000 on sales of $1.6 million in the six months ending June 29, 2014, according to SEC filings.

Mr. Parsi says small businesses like his “want additional capital to triumph.” It’s three California places and he expects to add five places during the following year and enlarge into the licensing and merchandising as well as franchising of branded products. Up to now, he says, the business has procured nearly $1.2 million of the $2.6 million it seeks.

Lattice Inc., LTTC 6.52% which supplies risk-free communication services to penitentiaries, spent less than $15,000 on its recent JOBS Act stock offering. That is much less than the more than $100,000 it’d have cost the Pennsauken, N.J.-based telecommunications company to raise the same amount in a conventional private placement, Lattice CEO Paul Burgess says.

Lattice had a $779,000 loss on sales of $4.6 million in the six months ended June 30, according to its SEC filings. In all, it raised approximately $1.1 million from investors who understood the business or individuals linked with it to finance the firm’s ongoing growth.