Reg A+ has been a win for creating capital raising opportunities for developing companies. Prompted by the JOBS Act, these new SEC rules and amendments to Regulation A became effective June 19, 2015. The “+” is the increasing of the maximum annual offering amount to $50,000,000 from just $5,000,000.
We have already worked with several companies – many “testing the waters” as Confidential IPOs. Two clients that did complete their process – and are openly on the SEC website are:
As you can see, Reg A+ is a very precise process. It should not be considered an “easy path.” Just “easier.” To be eligible for the Regulation A+ exemption, issuers must file an offering statement on SEC Form 1-A. This is similar to a S-1 registration statement but somewhat less arduous and has no SEC fee. The EDGAR system – and Vintage – are the tools used.
Regulation A+ offerings are divided as two tiers:
- Tier 1: annual offering may not exceed $20 million; no more than $6 million offered by selling security holders that are affiliates
- Tier 2: annual offering may not exceed $50 million; no more than $15 million offered by selling security holders that are affiliates
Tier 1 offerings or Tier 2 offerings that will be listed on OTC Markets, NASDAQ or NYSE do not have specific investor qualifications. For other Tier 2 offerings, investors must either be “accredited investors” or limit their investment to no more than 10 percent of the greater of annual income or net worth.
A Reg A+ exemption is offered to most companies organized and primarily located in North America. The following organization types cannot use Reg A+.
- Companies subject to Securities Exchange Act of 1934 requirements
- Investment companies or BDC (business development companies)
- Confirmed “bad actors”
- Development stage companies that have no specific business plan or purpose
- Development stage companies that have designated that their business plan is to merge or acquire with an “unidentified entities”
As above, the Reg A+ process is very much like the S-1 process. This white paper illustrates that.