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No Eternal Return for small investors

An exhibit by Katie Green at Meow Wolf's House of Eternal Return in Santa Fe. Meow Wolf is buying back all the low-cost shares purchased through a crowdfunding site. (Eddie Moore/Albuquerque Journal)

An exhibit by Katie Green at Meow Wolf’s House of Eternal Return in Santa Fe. Meow Wolf is buying back all the low-cost shares purchased through a crowdfunding site. (Eddie Moore/Albuquerque Journal)

Copyright © 2019 Albuquerque Journal

SANTA FE – Two years after allowing fans to purchase low-cost shares of its company through a crowdfunding site, Meow Wolf is buying back all the shares from more than 600 investors.

And although the investors are being promised at least double the amounts they put into Meow Wolf, some say they feel they’re being pushed out as the burgeoning art corporation’s profile and value are rising.

In July 2017, Meow Wolf started a campaign on the WeFunder site to allow hundreds of general or unaccredited investors to purchase shares in the company. It reached its cap of unaccredited investors in about one day, and then accredited investors – generally individuals who have net worths of more than $1 million – could get in on the opportunity.

Share prices ranged from $20 to $40, depending on when they were purchased. According to WeFunder, Meow Wolf raised $1.32 million from 621 investors.

Last week, this group of investors received notices signed by Meow Wolf CEO Vince Kadlubek saying the company would be buying back their shares for about $83 a share. The notices cite a clause in Meow Wolf’s investor agreement that allows it to buy the shares at any time.

Crowdfunding investors such as Nick Perry say they weren’t aware of that provision and felt the deal was promoted as a chance for the “small guy” to invest early.

“The way they portrayed themselves on WeFunder is that they were really being the champion of the small investor and trying to open the door for a day for you to get in on something amazing that’s going to be as big as Disney,” the 37-year-old from Loveland, Colorado, said.

Perry acquired 20 shares for about $500 and will get about $1,700 from the buyback. Perry and about 25 other investors he’s been in touch with are looking into filing a class-action lawsuit on the basis of misrepresentation, he said.

“It’s a pretty common theme that most of the people (I’ve talked to) are just everyday people who thought they might have had an opportunity through this company and felt they were misled,” Perry said.

Perry and others said they did not recall seeing or reading the investment contract. Richard Quintana of Albuquerque, who purchased $1,000 in shares, added that because of the quick turnaround of the WeFunder campaign, he was working quickly.

“The timing of it was crucial, so I wanted to jump on board ASAP because they made it (Meow Wolf) seem like it was going to be huge, and just with the media coverage I knew it was going to be.”

Quintana said he felt “used” and caught off guard by the buyback. “Don’t get me wrong; I double-plused my investment,” he said. “But I would have much rather stayed as an investor, as small as it was.”

A representative of Meow Wolf declined to comment. At the time of the WeFunder campaign, Kadlubek told the Journal it was a way to “even the playing field” between the general public and rich investors. A Q&A section of the offering said: “We want to give space for smaller investors who may not fit the normal investor profile.”

The buyback notices came just a couple of months after Meow Wolf received an investment of more than $158 million for coming projects from nearly 90 investors, reported in a federal Securities and Exchange Commission filing in May.

Meow Wolf’s interactive art installation in Santa Fe, the House of Eternal Return, has been a smash hit and attracted national attention. Meow Wolf has announced expansion plans for Denver, Las Vegas, Washington, D.C., and Phoenix.

A response to an investor with questions about the buyback said that “for a variety of reasons, including the significant increase in value since you originally purchased the shares, the Company determined that it would be in the best interest of it and its stockholders to exercise its right to implement the repurchase.”

Nick Tommarello, the founder of the WeFunder site, said this is the first time he’s aware of a company repurchasing from investors, although buyback clauses are standard.

Marvin Gabaldon, a 52-year-old truck driver from Belen who bought 25 shares for $1,000, said he doesn’t think the return is enough, given what he’s seen about the company’s growth.

He’d never purchased shares in a company before, but he thought the Meow Wolf deal could be an opportunity to turn a big profit one day and buy his granddaughter a car when she’s older.

“I just hope they make everything right for everyone who did help them out,” Gabaldon said. “The way they went about this, to me, it felt it’s not right the way they did it.”

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