Back on June 19th of last year, the new rules for Regulation A+ went into effect. Much debate and discussion has followed as to how to use Reg.A+ to raise up to $50 million dollars in capital every 12th month span – but one thing seems certain: Regulation A+ has been gaining momentum and many companies are considering going the Reg.A+ route as opposed to a traditional IPO.
A regulation A+ offering (or as we call it, an “IPOtogo“) allows companies to raise money from both accredited and non-accredited investors at a much less expense compared to the more widely recognized IPO. Regulation A has been around for quite some time, but it previously had very low limits for fundraising plus many compliance issues and costs that it was rarely used. When the new rules went into effect, Reg.A became “Reg.A+” (note the “plus sign”) and that is what is getting the market so excited these days!
Companies have an option of going Tier 1 (which allows a raise up to $20 million) or Tier 2 (where a company can raise up to $50 million). As per SEC stats, most companies are choosing the Tier 2 option, which makes sense because Tier 2 does not require a company review on a state-by-state basis, which drastically cuts compliance costs. Tier 2 also has several long-term benefits as well, many of which are discussed on the Reg.A Money Show podcast.
Most companies prefer the Tier 2 option as a capital raising vehicle with the possible intent of eventually going public. For that reason, doing a Reg.A+ offering is not the best option for some startup companies due to significant costs to get started due to filing, reporting, creating audited financial statements, document preparation requirements, etc. that can run into the six figures. However, when you hire a company such as the Reg.A Funding Group that aggregates these services, the costs become significantly less – and obviously much less than traditional IPOs would cost. (where many IPOs can cost well in excess of $1 million!)
Plus it’s wise to align yourself with industry professionals who actually know what they’re doing and have already been successful in the Reg.A+ market. That’s not to say the process is easy. There are many significant disclosure requirements that need addressing with a Regulation A+ equity offering and the time it will take for the SEC to review and qualify your deal may be several months from start to finish.
The benefits of going Reg.A+ are many, but one great aspect of a Regulation A+ offering is the ability to publicly advertise a Regulation A+ deal to all types of investors, big and small. And because these securities are “unrestricted”, they can be bought and resold, which creates liquidity through secondary markets and Reg.A+ platforms. Just to get in front of large institutional investors at a fraction of the cost of an IPO is a major Reg.A+ advantage that most companies don’t even realize they have right at their fingertips!
The only conclusion to be drawn is it makes sense for companies to consider Regulation A+ offerings as a means of equity crowdfunding. You don’t have to do it alone as there are companies out there which provide many services to handhold you through the process. Contact us today for a strategic roadmap on how to get moving with this fantastic funding vehicle that’s taking the capital markets by storm!