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Chapters:
- Regulation A+ listing options and requirements
- Regulation A+ listing on an ATS (Alternative Trading System) & Advantages, Disadvantages
- Regulation A+ Liquidity - Benefits and constraints
- Regulation D and Rule 144A Liquidity - Benefits and constraints
- Regulation S liquidity
Disclaimer:
The content in this webinar is not and shall not be construed as investment advice. This information is meant to be informative and for general purposes only.
MSC is not a law firm, valuation service, underwriter, broker-dealer or Title III crowdfunding portal and we do not engage in any activities requiring any such registration. We do not provide advice on investments. MSC does not structure transactions. Do not interpret any advice from MSC staff as a replacement for advice from service providers in these professions.
Rod Turner
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital service for mature startups and mid-sized companies to raise capital using Regulation A+. Turner has played a key role in building successful companies including Symantec/Norton (SYMC), Ashton Tate, MicroPort, Knowledge Adventure, and more. He is an experienced investor who has built a Venture Capital business (Irvine Ventures) and has made angel and mezzanine investments in companies such as Bloom, Amyris (AMRS), Ask Jeeves, and eASIC.
www.ManhattanStreetCapital.com
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
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Now I'll talk about liquidity and other aspects of these different methods. So re a plus liquidity is excellent. The, the, you have these options. You can go public on the NASDAQ, you can go to the OTC QB or QX if you do the QB or QX. Then on the QB, your reporting obligation is the same as having anyone having completed a reg A plus Tier two, which is annual gap audit, US gap audit, six monthly management financials. And of course any material change in the business you can list on an alternative trading system. The beautiful advantage of doing so, the downside is they have less liquidity and they're new and they're emerging. The upside is that there are no shorts and there are no naked shorts. So, unlike listing on the o TC markets or on a major exchange, many companies which are not really ready from a management bandwidth point of view or stage of business or predictability of returns and profits, many of those companies really aren't ready for the rigors of exposure to naked shorts, which stock brokers are allowed to put on all day any day they want.
So, you know, unless you're prepared to handle that, going out on those exchanges is a marginal, a marginal blessing going on. An ATS is a much better bet from that point of view. Okay, other aspects of Reg A+ liquidity, you can offer limited direct liquidity to your investors. It's limited by regulation. M for mother and the upside of, well, an upside of Reg A+ that is not, I think, generally understood, is that completing the Reg A+ makes all the insiders liquid. All of the older investors and the owners of the company, everyone is liquid. So there are obviously constraints on that, like the insiders and passive investors who own more than 10% of the company are restricted to only selling during a two week window after the company has reported results or an audit results through an audit or management financials. So that's pretty restrictive.
And during that window, they're restricted to 1% of float and float. You know, the volume trading each day, each day is that that limit applies to each day. That depends heavily on where you're listed, right? So an ATS isn't gonna give you humongous amounts of volume. And if you have four classes of securities, then to make it really easy for each group of people who own those securities, to trade them on an ATS or anywhere else, they have to be listed actually, right? So you have the extra expense of that. It does make it, it encourages you to keep the, the variety of securities you offer simpler and it encourages you if you're nervous to lock some, lock up some of your people before you do your Reg A+ just as you would in a an S one I P O. Anyway, so there's some really, the cool thing is though, if you look at it on the positive side of this, of this ledger, your, you know, long term investors who don't own more than 10%, they're liquid immediately.
And if they can find a buyer, they can sell it, sell to them. Or when you list someplace, they're able to sell and they aren't restricted to when the most recent results were reported. So that liquidity is lovely for them because, you know, in some cases they've been around a long time. You know, these overnight success stories take a while to build in my experience. Okay, rate D liquidity is better than it seems. In general terms. Typically one year holding period before any transactions. However private sales of Reg D securities to other accredited investors can be made immediately after purchase and a reg deed, I didn't know that until I studied it some time ago. Similarly, under another exemption, four a seven same thing. Privately securities can be sold. That means they can't be listed publicly. You can't be marketing that online.
You can't be promoting it. But privately those transactions are allowed and obviously privately to more institutional investors, you know, like these qualified institutional buyers, which is the proper term for QIBs. That would be under Rule 144A, and that's allowed at any time and then publicly after one year has passed. So that doesn't mean the shares are easily bought cause the company's probably not listed. But after a year, those rule 144A holding period has passed. Then those accredited investors investments are actually publicly tradable If they can find a buyer, that's pretty good. So, and, and the equivalent I mentioned already for 144A is that the QIBs are liquid immediately. And by the way, when you do this offering, Reg S investors are allowed to, they're liquid immediately too, as long as they don't sell to US investors. So international buyers of the 144A offering they're allowed to sell right away outside the US as far as the SEC is concerned. So again, you know, this is an interesting, interesting avenue to get a company liquid and raise money.
THIS TEXT TRANSCRIPT HAS ERRORS IN IT THAT WERE CAUSED BY THE SPEECH TO TEXT CONVERSION SOFTWARE WE USED. DO NOT DEPEND ON THE TEXT TO BE ACCURATE. WATCH THE RELEVANT PARTS OF THE VIDEO TO MAKE SURE YOU ARE PROPERLY INFORMED. DO NOT DEPEND ON THIS TEXT TRANSCRIPTION TO BE ACCURATE OR REFLECTIVE OF THE STATEMENTS OR INTENT OF THE PRESENTERS.