As the traditional IPO market languishes, many businesses are considering going with a Regulation A+ offering with an exchange listing instead. The JOBS Act seems to have ignited venture capital and private equity-backed companies at the expense of the IPO’s of the past. That’s why we termed Reg.A+ Offerings as an “IPO to go”.
In the 1990’s, we saw plenty of smaller IPOs raising in the $75 million and under range, but that is not the case today. Title IV of the JOBS Act made major changes in options for businesses of all sizes to raise money, up to $50 million in a twelve-month period under a Tier 2 offering. The final rules impose different disclosure requirements for Tier 1 and Tier 2 offerings (which require audited financial statements).
As mentioned in a previous post, the new rules modified the existing Regulation A framework by requiring EDGAR filing on disclosure documents, allowing confidential submissions with the SEC, providing for a “testing the waters” phase, and disqualifying bad actors.
To date, many companies have entered their “testing the waters” phase, which allows investors to pledge interest in the offering. During this period, no money is accepted by the issuer. This puts a brand new spin on what is normally considered “crowdfunding” these days. The benefit of this is a company’s clients or customers can now invest in the company itself and become its best evangelists.
When the final Regulation A+ rules were adopted in 2015, the IPO market was somewhat active and most companies with the financial resources to file an SEC disclosure document went the IPO route, mainly because it was more of a liquidity play. With the downturn of the IPO market, it’s a whole different story now in 2016 – and beyond for sure! The number of IPOs declined in 2015 and so far, 2016 has been the slowest period of time for IPOs in the United States since 2009.
The writing is clearly on the wall: Regulation A+ is the new big boy in town! It’s all about change. The IPO window is for all intents and purposes closed. Now companies are opting for the Reg.A+ Tier 2 offering with a NASDAQ listing instead… And companies like the Reg.A+ Funding Group are helping them get there successfully.