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A campaign launched by Pacaso aimed at attracting new investors continues apace despite a hiccup in online marketing materials that threatened to distract from the platform’s fundraising appeal, executives for the platform told Inman.
The Oct. 1 Reg. A growth round was offered to accredited and non-accredited investors seeking to purchase company stock in a bid to raise funds to expand the second-home platform’s portfolio of destination homes and line of products.
“This opportunity allows individuals to access private company equity in a leading real estate company, and be a part of reshaping the vacation home market,” Austin Allison, a co-founder of Pacaso alongside former Zillow co-founder Spencer Rascoff, said in a statement. “Our strong foundation — built on sales success, a vibrant community of proud owners, and a dedicated team — positions Pacaso for continued growth as the global leader of co-ownership.”
The campaign’s transparency was questioned following a decision by Pacaso to post “cumulative” financials instead of annualized profits in a pitch sent to investors that drew a harsh appraisal from at least one industry analyst. That analyst, Mike DelPrete, raised concerns the co-ownership platform was attempting to paint an inaccurate picture of its financial position.
Adding to the confusion, DelPrete opined, was the presence of unlabeled charts in the materials, which may have given some prospective investors an impression the data depicted annualized profits, not cumulative, DelPrete wrote in an Oct. 11 column that initially appeared on his own website, MikeDP.com, before later being picked up by Inman.com.
Among the red flags DelPrete suggested in his column was the inclusion of “Adjusted Gross Profit” data, a metric not considered a “generally accepted accounting principal,” or GAAP measure.
Non-GAAP measures aren’t uncommon and don’t indicate any wrongdoing. Pacaso’s SEC filing defines Adjusted Gross Profit and Gross Real Estate Transacted entries. When accumulated, each matches what Pacaso published. The filing reads:
“We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it provides consistency and comparability with past financial performance and assists in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their U.S. GAAP results,” Pacaso wrote in the SEC filing. “These measures have limitations as analytical tools when assessing our operating performance and should not be considered in isolation or as a substitute for GAAP measures.”
The SEC has extensive language on how companies need to present materials to investors. Namely, it must be done “through the lens of the reasonable investor.”
“The criticism is that we weren’t clear enough about indicating that those are cumulative numbers instead of annual numbers,” Allison told Inman. “I actually appreciate Mike’s feedback, and I think Mike is a super credible industry thought leader. I actually sent him an email thanking him.”
“Upon reflection and looking at the feedback that we received, we agreed, and we actually added the cumulative descriptors to the chart,” Allison added.
Delprete captured the charts in question from a Google Slides deck that was not closed, sent out mistakenly after he registered to receive investment information, according to Pacaso. DealMaker, a broker-dealer working with Pacaso, handles the distribution of marketing materials.
“It wasn’t even a Pacaso created or managed link, which is how he had access to it. The broker-dealer had not closed the deck,” Allison said. “So the comments he saw were comments from the past, around when the team was going back and forth on what metrics we want to show to present the information. The decision had already been made a week before he published this to add the cumulative tags and the change had already been made across all other documents.”
The same partner handles the company’s public facing investor page and was late to update them there. The changes are now intact.
“One thing that I think is worth mentioning is that it is a very common practice for companies like us to present certain metrics on a cumulative basis — that is not unconventional at all,” Allison said. “And when I say businesses like us, what I’m referring to are businesses that have this concept of assets under management associated with their model being unlike a traditional real estate brokerage, who you know, sells a home one time, and that home’s gone and they’re not making future revenue on that home.”
Allison said he’s excited to reveal the company’s H1 results (first half of the year) in the coming weeks, and that 2025 will see a number of new initiatives for the second home platform.
“Once those are available, it will tell a more holistic story about where Pacaso’s been and where Pacaso is headed,” Allison told Inman.
“The company is in its infancy with respect to the size of this market opportunity, meaning we’re just focused right now on high net worth families who want luxury homes at the high end, and over the course of the next 5, 10, 15, 20 years, we expect to serve more people at more prices and more markets,” Allison said. “I think that we will have $50,000 to $100,000 shares.”
“I do want to be clear that transparency is core to the way that we run our business,” Allison said. “We’re a very transparent culture. One of our core values as a company is to communicate constantly.”
Allison encouraged people to view a public investor webinar, specifically at minute 18, at which point he explains the numbers. “Pacaso isn’t hiding anything,” he added.
