Comment: Mass EB5 Layoffs

What will the EB5 industry look like when November 21st dawns? For investors, the investment amount would have gone up 80%. The demand will shrink--but by how much? If the demand shrinks as much as 44% in investors the total size of the market in Dollars Invested would remain the same. ((1.00-0.44)x(1.00+0.80) = 1) However, if the demand were to shrink even more, say 72% in investors, then the total size of the market in Dollars Invested would shrink by half ((1.00-0.72)x(1.00+0.80)=0.50).

For projects, the definition of TEAs is changing which will now exclude almost all of the large urban developers. As the differential between the TEA ($900K) and non-TEA ($1.8M) is gigantic, there will be no practicable market left for large urban projects. In terms of capital raised in the EB5 industry before the Nov 21 deadline, players that raised 80% of the total EB5 capital raised in the last 5 years will be out of the market. Even if the total market shrinks as a whole in Dollars Invested, the players that will remain and perhaps even grow will be largely rural projects and projects in high unemployment areas within MSAs.

With no hope of raising EB5 capital, all kinds of teams in large urban projects will shrink dramatically including Investor sourcing and relations teams; Project sourcing teams and all other EB5 related teams within large urban projects. Several of the top 100 Regional Centers have already laid off 50% to 90% of their staff. After November 21st almost all such regional centers will lay off significant percentage of their staff ranging from 50% to 90% of current staffing. The industry as a whole would shrink by approximately 50%. Just as law firms that prospered in the heyday of Chinese EB5s had all their large teams decimated in the past year--the same will happen again after the deadline. The same will be true for other support services such as business plan writers, economists and securities attorneys. Many working hard today across the industry will find themselves polishing their resumes and exploring areas other than EB5.

The network effect of this 50% shrinkage in the EB5 industry are even greater. As the large urban projects were the central nodes of the current EB5 industry network, their disappearance will result in almost 95% shrinkage in existing EB5 networks. With such a devastating shrinkage in the existing industry network, it is fair to say a whole new network within the EB5 industry will have to be created establishing new relationships from scratch.

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