Comment: Major EB5 Project Fails

Major EB5 Project Fails 

Table of Contents:

1. Introduction
2. Top EB5 industry players and market share
3. Track record of top 5 players
4. Failure of a project of a top 5 player
5. Impact of failure for EB5 industry
6. Conclusion

1. Introduction: We are reporting on a significant shakeup in the EB5 market. We will start by giving the historical background, then report the recent news and then talk about its implications for the EB5 industry.
2. Top EB5 industry players and market share: RIA changed the landscape of the EB5 industry. There were around 75 players in the USA in the pre-RIA market, each of whom did one project every year or every other year. Post-RIA there are about 50 such players, 25 players withdrew from the EB5 market. Due to the redefinition of TEAs, RIA drove out the players specializing in prime areas in large cities (such as Related). The share of rural projects went from single digits to nearly 50%. In the current market, the top 5 players have approximately a 45% market share, the next 45 players have another 45% of the market with all others having the remaining 10% market share.
3. Track record of top 5 players: The biggest competitive advantage of the top 5 players is their long track record of 1,000s of I-526s filed, $1 to $4 billion raised each, and hundreds of millions of dollars returned to investors by each of the top 5. This track record gave comfort to investors uprooting their family and business to move to a new country thus enabling the top 5 players to capture 45% of EB5 capital raised in the last few years. This is despite the fact that almost all of the top 5 have previously had notable reverses with 100s of investors losing all their money. EB5 investors have instead focused on getting their Green Cards (and therefore on job creation). Up to now, the job creation record of the top 5 players has been spotless, which has been a crucial part of their appeal to investors faced with a 100% Green Card record for the last 10+ years for each of the top 5 players.
4. Failure of a project of a top 5 player: A project of one of the top 5 players has recently failed. This is due to the fact that the project was a clean energy project championed by the Biden administration. The Trump administration has reversed policy and most players in the alternative energy field, including many Fortune 500 companies, no longer consider ventures in the green energy field as viable. Quite apart from financial failure, this is the first time that a project of the top 5 EB5 players has failed to create all jobs. It appears that more than half of the 100+ investors in this project will lose their Green Cards (this is in addition to all the investors losing all their money). 
5. Impact of failure for EB5 industry: Every one of the next 45 players will point to this failure to create jobs to chip away at the perceived safety of top 5 player investments for getting Green Cards. The risk differential between the top 5 and the next 45 companies will thus be reduced. We expect the market share of the top 5 companies to fall from 45% to 35% in the next 6 months, creating an attractive opportunity for the next 45 players. 
6. Conclusion: This is the biggest shakeup in the post-RIA EB5 market, after the exit of Related from the market due to RIA.

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