By Stephen J. Schulte and Steven J. Spencer
There are those who say that nothing in life is free. In the context of "stock
giveaway" programs, at least, such naysayers may be right. Some companies give away
shares of stock as a creative way to publicize their products or company name. While the
marketing concept is not new, it has become increasingly popular in the past year,
primarily with small, closely-held Internet companies seeking to attract attention to
their Web sites. This article discusses a series of recent no-action letters and
enforcement proceedings that reflect the SEC's position regarding this promotional
technique.
Last year, a number of small start-up companies initiated "free" stock
promotions as a means of increasing their Web site traffic. Their objectives ranged from
general branding and increasing market share, to collecting data and strengthening the
basis for charging advertising fees. The first well-publicized Internet stock giveaway
