Just over a year ago – June 19th, 2015 – Regulation A+ crowdfunding became effective. We’ve been tracking news and companies seeking to go this route ever since, so the question arises: is Regulation A+ actually working? Has it become the “game changer” everyone has predicted? Perhaps the answer lies in the statistics and status of the program so far.
There have been about 105 Regulation A+ offerings filed to date. (However, word on the street says many issuers are filing confidentially, so that number may be quite higher.) Out of those, about 44 have been qualified by the SEC where 16 of those are being actively sold as of right now. The average time to qualify for a Reg.A+ offering is about 100 days from the date of filing. But remember some issuers filed their offerings before the June 19th effective date, then amended their offerings under the new Regulation A+ rules.
The cost for filing has averaged about $107,000 each, exclusive of Blue Sky and/or auditing fees. On the high end, legal fees went as high as $500,000 – but in general, issuers need to budget at least $100K as costs (of course piggybacking on the resources of reputable Reg.A+ consulting companies can probably save you significant costs in this matter).
Industries lacking access to traditional financing are the favorites to use Reg.A+ to raise capital such as those involved in the Cannabis business (such as PotEstate.com). Transportation companies including Elio Motors have raised more than $17 million successfully already and the real estate market has been well represented in Regulation A+ crowdfunding as well with companies such as Fundrise and American Homeowner Preservation. Again, these are REAL real estate companies reporting success with Regulation A+ so far.
And Reg.A+ has also won a major legal battle when Montana and Massachusetts filed a lawsuit against the SEC over the scaling back of state regulatory authority and policy of Tier II offerings. On June 14, 2016, the DC Court of Appeals rejected their arguments, clearing away any remaining uncertainty or challenges to Reg.A+.
What’s pleasantly surprising about the entire Reg.A+ industry is the fact that the SEC looks like they are doing a great job in responding to comments aimed at qualifying Reg.A+ offerings and continue to streamline the entire process to get approvals done even faster. Previous to Reg.A+, 2 years plus was actually a realistic timeline to qualify. As mentioned previously, Reg.A+ is averaging about 100 days!
Obviously, like every other new industry, there are still kinks to work out, mostly with respect to the broker-dealer process. But in general, we’d have to say “so far, so good”.
How about you? Have you explored the Regulation A+ crowdfunding option for your company? You’d be wise to do so if not – you may be pleasantly surprised on what you can achieve. Contact the Reg.A+ Funding Group today!