July 25, 2017
Written by Domenico Positano, Dealogic Research
How Reg A+ made the grade
Until two years ago, smaller private companies could only solicit funding in the US from accredited investors via offerings under Regulation D. However, that changed on June 19, 2015, 3 years after the Jumpstart Our Business Startups (JOBS) Act was signed into law by President Obama. The date represented a crowdfunding milestone as Title IV of the Act, known as Regulation A+ (Reg A+), went into full effect. It allowed private companies to raise money from all sources for the first time—including non-accredited investors. Since then, 199 issuers have filed for a Reg A+ offering on the SEC. Elio Motors priced the first Reg A+ IPO ever in February 2016, raising $17m and listing on the OTC.
Chicken Soup for the Soul Entertainment launched its dual class mini-IPO on July 17, looking to raise up to $30m with joint bookrunners CFP/Capital Markets, The Benchmark, and Weild & Co.
The ABCs of Reg A+ Deals
Like an IPO, Reg A+ allows companies to offer shares to the general public. However, fees associated with these deals are much lower than traditional IPOs and issuers face fewer disclosure requirements, making Reg A+ offerings a mini-IPO. Before an issuer launches a Reg A+ offering, it can test the waters to understand the indication of interest from future investors. If it decides to pursue a mini-IPO, it will file a Form 1-A with the SEC. Then following any comments or amendments from the regulator, it will file a final prospectus marking the issuer as qualified to launch the offering and raise capital.
Issuers pursuing a mini-IPO can choose between two types of Reg A+: Tier I and Tier II. Both can be on a continuous basis or single close. Of the issuers that have filed for a Reg A+, 83 have filed for a Tier I offering, and the other 116 for Tier II. The majority of Reg A+ listings so far have also preferred a continuous basis, which gives issuers more flexibility based on market conditions and financing needs without incurring the time and cost of initiating and completing a new qualification process.
Reg A+ IPOs building momentum
In June 2017, three Reg A+ IPOs priced. Shifpixy raised $12m via sole bookrunner WR Hambrecht, and listed on the NASDAQ on June 27—representing the first ever underwritten Reg A+ IPO. Plus, Adomani and Myomo raised $13m on the NASDAQ and $5m on AMEX, respectively, on a best-efforts basis
Data Source: Dealogic, as of July 21, 2017