The House Financial Services Committee, led by Chair Jeb Hensarling, has been pushing through legislation very quickly these days. One of the issues Regulation A+ (Reg.A+) offerings seems to be facing is many large institutional investor firms think that a maximum raise for a Reg.A+ offering isn’t high enough. That’s about to change as a House of Representatives panel recently approved a bill that would raise the limit on a Reg.A+ deal from $50 million to $75 million to further bolster capital raising efforts for companies considering equity crowdfunding as a means to raise money.
This move provides another positive impact for small to mid-size companies by attracting more “traditional underwriters” and more sophisticated investors to the Regulation A+ process. The bill (HR 4263) was sponsored by Thomas MacArthur (R-N.J) and is called the “Regulation A+ Improvement Act of 2017” and was passed by the House Financial Services Committee by a 37-23 vote. (We’d like to have a talk with the 23 who voted against it!)
As readers of our news blog are well aware, Reg.A+ originated under the “Jumpstart Our Business Startups Act” in order to allow companies of all sizes to raise capital under relaxed rules compared to a traditional IPO. Since Reg.A+ went into effect in 2015, the U.S. Securities and Exchange and Commission (SEC) stats show its popularity as trending upwards as Reg.A+ continues to become more and more widely in use.
Reg.A+, companies require fewer disclosures and are allowed much more flexibility in marketing to potential investors, both accredited and non-accredited. Yet, major underwriters and broker-dealers have been slow to fully adopt Reg.A+ because the size of the raise is minimal compared to a traditional IPO. Raising the Reg.A+ limit to $75 is certainly a step in the right direction to alleviate this problem as it opens Regulation A+ to larger companies who may be considering doing an IPO. Plus, the raised limit will probably have a positive impact for smaller companies because it may attract some of the more traditional underwriters to the process. Reg.A+ is cheaper and faster – and now with the passing of “HR 4263”, it’s gotten better… again.
Reg.A+ has been termed a “Mini-IPO” or (as we like to call it) an “IPO to go“, and for good reason: while the cost of doing a full blown IPO has skyrocketed, the crowdfunding industry has been adopting Reg.A+ and leveraging it to raise growth capital with sights on listing on a public exchange to access the capital markets for a fraction of what an IPO will cost.
When this bill is signed into law, expect more small businesses to take advantage of Regulation A+, which is why Reg.A consulting firms like the “Reg.A Funding Group” will see a huge demand for their professional services to take a deal from concept to reality.