Regulation A+: The New Alternative to IPOs for Small Businesses

Can you have your cake and eat it too when it comes to fundraising? Some who work with Regulation A+ (Reg A+) believe it is an attractive option for companies looking to raise capital and gain access to public markets. In recent years, many companies have successfully leveraged Reg A+ to raise funds, but it is important to understand the various intricacies before moving forward with a Reg A+.

Reg A+ allows companies to raise up to $50 million in a 12-month period from both accredited and non-accredited investors in a Tier 2 offering. This is a significant increase from the previous limit of $5 million under Regulation A. Reg A+ offerings are similar to traditional IPOs but have lower costs and fewer regulatory requirements.

One key advantage of Reg A+ offerings is that they allow companies to raise capital from a larger pool of investors, including non-accredited investors, who may not meet the net worth or income requirements to participate in traditional private placements. This provides greater access to capital for early-stage and small companies, which may struggle to attract investment through other means.

Reg A+ also provides greater liquidity for investors as the securities sold in a Reg A+ offering can be freely traded. This can attract more investors, who may be more willing to invest in companies that offer liquidity.

Another advantage of Reg A+ is that it has reduced ongoing reporting requirements compared to traditional public companies. This makes it easier for companies to comply with regulatory requirements and focus on growing their businesses.

However, there are also some cons to consider when using Reg A+ for fundraising. Conducting a Reg A+ offering can be complex and time-consuming, requiring careful planning and execution. Additionally, issuing additional shares to raise capital may result in dilution of ownership for existing shareholders. Reg A+ offerings are also limited to investors in the United States, which may limit the pool of potential investors.

Furthermore, there is no guarantee of success in a Reg A+ offering, and the company may not raise the amount of capital needed to achieve its goals. Finally, issuers must comply with various regulatory requirements, including filing an offering statement with the SEC, providing ongoing reporting, and complying with state securities laws.

Reg A+ offers many advantages for fundraising, but it is important to carefully evaluate the pros and cons before deciding whether it is the right option for a company. It is important that companies work with experienced legal and financial professionals to ensure that they fully understand the requirements and risks associated with Reg A+ offerings. With proper planning and execution, Reg A+ can be a powerful tool for companies looking to raise capital and gain access to public markets.