Today, the WSJ published a piece headlined Wall Street’s IPO Business: The Worst in 20 Years that chirpily reminded us that 2016 has been a dour year for IPOs.
“As of last Friday, just 68 companies had gone public on U.S. exchanges this year, raising $13.7 billion, according to Dealogic. At this point in 2015, 138 companies had listed on U.S. exchanges, raising $27.3 billion—a 62% drop from the same period in 2014.”
I propose another headline. Wall Street’s Mini-IPO Business: The Best in 20 Years.
68 companies via conventional IPOs… compared to 81 mini-IPOs via the Regulation A+ process. Agreeably, from the perspective of the WSJ article (impact on investment banks), it’s an apples to orange comparison, however from corporate quest for capital perspective – as well as the tangible “filing paperwork” perspective… a comparison can be made. (We know a lot about Reg A+)
In fact, many comparisons can be made.
As you see, above, Reg A+ is not without costs.
- Expense: Upfront legal and accounting costs to prepare filings and secure SEC approval and infrastructure for ongoing SEC reporting obligations.
- Time consuming: Process of preparing (SEC estimates 750 hours) to prep Form 1-A and offering circular; SEC review and approval may take several months.
- Disclosure tasks of being public company: Under Reg A+ Tier 2, issuer is a quasi-public company and required to publicly disclose its financial results on a semi-annual basis and file current reports to disclose material events. Under Tier 1 offering, financial statements must be publicly available on SEC website at offering.
Also, the SEC is watching the filings carefully. Just last week the SEC, in the first action of its kind, has temporarily suspended a Tier 2 Regulation A+ offering because the registrant had not filed its annual report.
We held an expert’s webinar that details out the differences, both pro and con. You can watch it here.
PS: Yes, I know, Reg A+ has only been with us since June 2015, well within my 20-year data-point.