On December 19, 2018, the SEC adopted final rules allowing reporting companies to rely on the Regulation A exemption.
How did we get here?
The SEC adopted a new – and greatly improved – Regulation A, known as Reg A+, in 2015. As noted in previous posts (see here and here) Reg A, provides an exemption from registration under the Securities Act for smaller public offerings, but for many years was seldom used due to cost restraints and small financing caps. The 2015 amendments, adopted in response to the JOBS Act, remedied these shortcomings, updating Reg A to make it a more viable capital-raising tool.
The main benefits of Reg A+ include the following:
- Companies can raise up to $50 million every 12 months via two overlapping tiers.
- Tier 1: offerings of up to $20 million in a 12-month period.
- Tier 2: offerings of up to $50 million in a 12-month period.
- Insiders can sell their shares in a Reg A+ offering.
- Investors in a Reg A+ offering have immediate liquidity – they can sell their shares once the offering is completed and don’t have to hold them for a period of time.
- Some Reg A+ offerings are exempt from state securities or “blue sky” laws.
- Some Reg A+ offerings are easier to list on an exchange.
- Reg A+ can be used for merger and acquisition transactions.