The Owner’s Calendar – The Mini Public Offering Has Arrived

Smaller companies can now access the capital markets to raise up to $50 million in any 12 month period while bypassing many of the headaches and costs of a traditional public offering.

On March 25, 2015 the Securities and Exchange Commission adopted final rule amendments to Regulation A of the Securities Act of 1933. The amendments were mandated under Title IV of the 2012 JOBS Act. Under the new rules, companies can choose to offer securities in either a Tier 1 offering of up to $20 million or a Tier 2 offering of up to $50 million. Each tier has graduated regulatory requirements related to offering content, reporting requirements, and investor qualifications.

In addition to raising the capital limits from $5 million to as much as $50 million, the new Regulation A (often referred to as “Regulation A+”) has many key benefits compared to the previous version. One notable change is that shares issued under Tier 2 offerings will be exempt from costly and burdensome state securities registration requirements.

Under either type of offering, issuers submit a revised Form 1-A to the SEC. This form contains three parts and provides potential investors with the information necessary to make an informed decision about investing in the issuer’s securities. Disclosed information includes a description of the offering, a description of the issuer’s business, disclosures about officers and their compensation, an MD&A type discussion, a summary of current ownership of the issuer, and the required financial statements as well as other exhibits. The offering statement can be submitted for non-public review by the SEC, but must be publicly filed at least 21 days before its qualification by the SEC.

For companies with credible financial statements who are looking to raise money from non-accredited investors or peer-to-peer lenders, Regulation A+ may be a viable alternative at a reasonable cost.

A summary of the key differences between the Tier 1 and 2 offering options is provided below:

IPO Lite Matrix.xlsx