Recently finalized Regulation A+ allows most private companies to raise up to $50 million by selling securities to the public. Companies using Regulation A+ can advertise the offering and solicit investors, and anyone can invest (subject to some reasonable investment limits for non-accredited investors).
Owners of a company raising capital with Regulation A+ can sell up to $15 million of their own securities in the company as part of the offering, and there are no limits on the resale of the securities (except for affiliates), assuming a secondary market actually develops.
Regulation A+ does come with compliance obligations, including an offering statement that is subject to SEC review and comment, and audited financial statements and semi-annual reporting obligations for offerings above $20 million. But such compliance obligations are not nearly as onerous as they are for a traditional public offering.
Regulation A+ is only recently a finalized rule, and the SEC just issued 11 new CDIs dealing with many discrete issues. The types of companies that may benefit from the updated rule will likely evolve, but below are a few examples of types of companies that may benefit from this improved funding option:
- Private businesses that can provide strong current returns with the possibility of steady growth (but not large enough returns to attract venture capital).
- Companies seeking the benefit of a potential public market (assuming one develops) for their securities and a broader investor base without the costs of Exchange Act registration and reporting.
- Owners of private businesses who want liquidity but do not want to sell the company or surrender control to private equity (and are not interested in a traditional public offering).
- Companies with large, loyal customer bases who want to invest early.
- Real estate developers looking for funding alternatives from traditional loans (or interested in soliciting investment, even if modest, from current neighbors and community stakeholders).
- Bank holding companies not currently subject to SEC reporting requirements that want an alternative to Regulation D private placement offerings.