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Chapters:
- Characteristics of Reg A+ liquidity
- Insider stock sales allowed during the capital raise process
- Reg A+ makes all classes of stock tradable
- When Insider trading is allowed
- You are not required to list your company on an exchange
- Post-offering audit requirements are less demanding than in an S-1 IPO
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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.
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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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Liquidity. What is the, what is the, what are the options or what are the characteristics of the liquidity which Reggae Plus brings to the table? The S E C says that unless the issuing company puts a restriction on the shares are liquid immediately upon purchase. So an investor puts in $3,000 and they, when they're issued their shares, they get a, typically will get access to the transfer agent to an online account. If they have a buyer, they're allowed to sell them. This isn't the same thing as saying you have listed those shares, but they are liquid. It's a big advantage when handled in the right way.
Insider selling up to 30% of the capital raised can be sales of securities by insiders, prior investors and owners of the company. So that's a sizeable, sizeable amount of money. You know, obviously if the 30% of the whole raise is going to insiders and they're all founders selling out, that isn't gonna strike. You know, that isn't gonna give a lot of confidence to investors. So, you know, I don't recommend you jump on that to, to quickly, but the ability to utilize this feature is a good thing. The ability to have selling insiders as a part of the offering where you're not restricted to when, when was the most recent audit, when was the most recent management financials, If it's 30%, 30% of all capital raised this week, next week, next month is distributed to the selling insiders. Another thing that isn't, I think, widely known about Greg a plus is that the, this is a public offering as far as the SCC is concerned.
It's actually a public offering. And as a result, all of the securities in the company become liquid, which is to say the insiders who own those securities are now allowed to sell them as long as they've exceeded their rule 1 44 holding period. So you go, you go pub, you go, you go through the public offering using Reggae plus with one security, but you may have three or four other classes of security that you sold to prior investors, and they are now liquid, which is, again, not to say that you, you are listing those securities, but they are allowed to sell them to anyone. They're not restricted to selling them to wealthy people if they find a buyer. And of course you have the opportunity, once you've listed a security, if you, assuming you've listed it, it makes it easier for anyone to have liquidity.
If you do choose to list, and I'll get into where the listing options are, you'd be more on that kind bit. But the advantage of you can provide a route to convert, Let's say you've listed a class of preferred called preferred C just to pick a random name, and you have preferred A and preferred B investors from, from ancient history. When you list the preferred C security, you aren't, if you are listing it on an alternative trading system or on the OTC QB or the OTC qx, you are not converting everyone over automatically to common so that preferred C is listed. And you could then provide a path to convert your preferred A and preferred p b investors into preferred C owners. So they're, they're liquid, literally in a more convenient manner post offering and, and for that matter during the offering, by really post offering, once you are in a trading situation that you have liquidity in some way, then the insiders are allowed the insiders who are principles of the company and investors that owe more than 10% of the company, they are insiders and the SCC places heavy restrictions on when sales can be made and b and and the amount that of sales that can be made, right?
So it's easier for them to raise money via being a part of this, the raise than it is post raise when listed. Because as in as is the case with companies, all, all companies that in the US that are listed on a trading exchange, the s SEC restricts the ability of insiders to sell to, you know, right after the audits published and things like that. It'll, I'm not gonna get into excessive detail about that, but that's, that's obviously a restriction. You are not required to list your company just because you do a reggae Plus. It is not a requirement that you list the company. You can conduct a direct listing to the NASDAQ or the N Y S E via reggae plus. I'll get into that more later.
So essentially, a company that raises money via Reggae Plus has a simplifying process than having conducted an S one is subject to less expensive, less onerous reporting obligations than if they had filed an S one. And, and in comparison to the cell companies and the, you know, the companies that have been down listed from one of the major exchanges, but that are on one of the minor exchanges, they still have a PCA or B quarterly audit obligation. Whereas your company, if you do a Reg Plus and you arrive and choose the list on the, on the OTC QB or the qx, for example, you only have a an annual US gap audit requirement. And on the QB six monthly management financials, which is the same thing that regular plus requires if you're on the qx, then quarterly management financials, but still only a US gap level audit once a year.
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.
