Reg A+ (Mini IPO)
Regulation A+ offerings, also called mini-IPOs. These mini-IPOs are an alternative form of equity financing for small- to mid-size growth-stage companies. They give access to both Main Street and Wall Street investors.
Although Reg A+ offerings are primarily marketed toward retail investors, the offerings create publicly traded shares that are available to both retail and professional investors. This is great for growth companies looking for liquidity. The JOBS Act allows a company to gauge public interest (“test the waters”) in a potential Reg A+ offering before formally announcing or filing a commitment to execute the offering. This is helpful for companies because it helps them determine if the offering is likely to succeed, and if the capital raise process will be worthwhile.
Reg A (Reg A+) consists of two tiers (Tier 1 and Tier 2)
Tier 1 enables businesses to raise up to $20M in a 12-month period.
Tier 2 enables businesses to raise up to $75M in a 12-month period.
Reg A+ is available to any non-public U.S. or Canadian company that is not:
a blank check company (like a SPAC used in a Reverse Merger).
an investment company, or
disqualified under the SEC’s “bad actor” rules.
Reg A crowdfunding offerings timeline: 2-4 months, max allowed time – 12 months.
Who is Reg A+ Right For?
Companies Looking to Raise Between $5 – $75 million
Consumer centric products/services or understandable value proposition.
Companies with a Large & Active User Base
Things to consider:
Regulatory approval prior to closing investments will most likely take 2-3 months.
More investors (although this can also be a benefit as long as it’s managed appropriately). Crowd WallStreet can help assist with managing your investors on a cap table.
Legal and accounting fees can potentially be higher than under a traditional raise from accredited investors.
Tier II raises will be subject to ongoing public reporting. This can be a benefit for companies planning to exit through traditional IPO.
"Testing The Waters"
To test the waters, company leaders (or a representative) normally talk to potential investors and ask them how much they would consider investing if the company decided to go through with the offering. This can also be done with Reg CF.
Issuers should note that any "TTW" materials used must be filed as part of the Form C under new Rule 201(z). This requirement is meant to ensure that all prospective investors gain access to the information that the issuer has made publicly available before the offering.
Misleading statements regarding projections, business plans, risks, financial condition, etc. during the TTW phase can still be a source of liability.
SEC Form 1-A
Tier 1 & 2 of Reg A+ offerings require that the company file Form 1-A (also called the Offering Circular) with the SEC.
Form 1-A offering statement has three parts: Part I, which requires basic issuer information such as the details about the security being offered, the jurisdictions where the securities will be offered, and recent sales of unregistered securities. Part II, requires the business, management, financial statement, and other substantive disclosures. Part III, contains exhibits and related documents.
Once the regulatory qualification has been received the company may begin its Mini-IPO. Crowd WallStreet will also work with the company to market its capital raise.
Throughout the Reg A+ offering, Crowd WallStreet will work in tandem with the company to effectively communicate with investors, manage investor relations, and support the operations of the campaign.
Crowd WallStreet will also interview the founder(s) on our Podcast.
We will work with our escrow agent to make sure the funds from escrow will be transferred to the company upon completion of the offering.
Investments are made official when the campaign has ended. Investors will have access their summary statements and a portfolio of their investments once they have been closed.
Note that investors have the right to cancel their investment for any reasons up to 48 hours before a closing occurs.
Congrats! Your campaign has came to a close. However, you still have some follow ups to do.
Under Regulation CF, companies are required to report to its shareholders on an annual basis.
In certain circumstances a company may terminate its ongoing reporting requirement if:
The company becomes a fully-reporting registrant with the SEC
The company has filed at least one annual report, but has no more than 300 shareholders of record
The company has filed at least three annual reports, and has no more than $10 million in assets
The company or another party purchases or repurchases all the securities sold in reliance on Section 4(a)(6)
The company ceases to do business
If Reg A+ is right for you, apply today!