Regulation A+, also known simply as Reg A+, is an exemption from registration under the Securities Act of 1933, and amended by the JOBS Act, that allows issuers to generally solicit investors to raise up to $75mm in capital. It enables companies to efficiently raise capital from a broad spectrum of investors, including both accredited and non-accredited individuals. Considered a mini-IPO, as well as a complementary option to other exempt securities offering methods under the Securities Act of 1933, Reg A+ provides a streamlined avenue for fundraising.
If you are contemplating a Reg A+ offering, it is likely that you have several questions. This simple overview delves into some of the most frequently asked questions about Reg A+ offerings and aims to clarify and provide insights for those considering this avenue for capital raising.
Reg A+ at a Glance
A Reg A+ offering allows private companies to raise capital by selling securities to the public. It is a two-tiered system consisting of:
Tier 1: Allows companies to raise up to $20 million in a 12-month period. This tier requires companies to register with state securities regulators.
Tier 2: Allows companies to raise up to $75 million in a 12-month period. This tier preempts state securities laws, which can make the process more efficient for issuers.
Who Can Invest?
Both accredited and non-accredited investors can participate in a Reg A+ offering. This makes it an attractive option for companies seeking to raise capital from a wide range of investors.
What Are the Reporting Requirements?
Companies conducting a Tier 1 Reg A+ offering must file an offering statement with the SEC and the relevant state securities regulators. For Tier 2, companies must file an offering statement with the SEC and provide ongoing reporting, including annual reports.
How Long Does It Take?
The timeline for completing a Reg A+ offering can vary depending on factors such as the complexity of the offering, the diligence process and regulatory review. On average, the process may take several months, with Tier 2 offerings typically taking longer due to the additional reporting requirements.
What Are the Costs?
The costs of a Reg A+ offering can include legal, accounting, marketing, filing fees, transfer agent fees, broker-dealer fees and technology fees. Additionally, there may be ongoing compliance costs for reporting and administration. It is essential for companies to understand the role of each of these expense areas and budget accordingly.
Can I Market My Offering?
The good news is yes. One of the significant advantages of Reg A+ offerings is the ability to market and solicit interest from potential investors. This allows companies to reach a broader audience and generate more interest in their offering.
Can I Test the Waters Before Launching?
Reg A+ further empowers companies to "test the waters" by soliciting interest from potential investors before officially launching their offering. This can help gauge how to refine the offering terms based on investor interest.
Should I Use a Technology Solution?
Employing a robust technology platform to facilitate a Reg A+ offering is ideal. This can provide an additional avenue for reaching potential investors and can be particularly beneficial for companies looking to tap into a broader investor base. Additionally, technology solutions can create an enhanced fully automated investor experience. Best-in-class technology solutions will allow an issuer to create a true “marketplace,” which enables investor onboarding, primary issuance workflows and even secondary trading solutions.
What role does a Broker-Dealer Play and What Should I Look For?
A broker-dealer can be used to oversee and manage various aspects of your capital-raising process. The services provided may vary by broker-dealer, but it is advisable to consult with legal and financial professionals who are experienced in securities regulations before embarking on a Reg A+ offering. A broker-dealer’s services can include but are not limited to, ensuring investors are vetted and that the investment is suitable for their needs, reviewing marketing materials to ensure they are not misleading or in violation of securities laws, reviewing offering materials and assisting with the investment and closing process. A Reg A+ offering can be a valuable tool for companies looking to raise capital if it is executed properly and efficiently.
Reg A+ offerings provide an alternative pathway for companies to raise capital and offer securities to a diverse group of investors. While the framework offers significant advantages compared to full registration, it is crucial for companies to carefully navigate the process and consider the associated costs and reporting requirements.
To ensure compliance and maximize the chances of a successful fundraising campaign, a Reg A+ offering can be a valuable tool for companies looking to grow and expand their operations if it is executed properly and efficiently.
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