The list of major Alternative Trading Systems (ATS)
Take your company public to the NASDAQ
Reg D Liquidity may be better than you think
Can I list my company's Reg D, Reg A+ or Rule 144A securities on an Alternative Trading System (ATS)?
Reg A+ liquidity explained for insiders and investors
The list of major Alternative Trading Systems (ATS)
Take your company public to the NASDAQ
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 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.
Manhattan Street Capital, 5694 Mission Center Rd, Suite 602-468, San Diego, CA 92108.
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Okay, so welcome everybody. Briefly my bio. I've had the good fortune. I started as an engineer in the UK. I have had the good fortune to move to the US and to get into high tech startups from the age to 24. I'm now 65 and I am a driven person. I hope I live a healthy life and I'm certainly have the energy of a much younger person than my actual age. I'm not doing this because I need to, I'm doing business because it's my nature. I don't want to stop. Don't want to slow down. I I've had the good fortune to be a founder or one of the senior executives in seven successful startup companies. One of which is Manhattan Street Capital. Now I'm counting it in the bucket of successes and six of those, we had liquid outcomes. Two of them, we took public to the NASDAQ.
One of them was Ashton Tate way back in November, 1983, where I was confusing the young for the underwriters. And the other one was Symantec. The makers of Norton antivirus. I've launched with a friend, a venture capital firm and an incubator along the way. And I've raised money from some really amazing blue chip venture capital firms. I've done, I've played a key role in acquisitions, particularly at Symantec, where we were making acquisitions and I was not making the deals. I was looking for companies, but I was doing the merger part, making the mergers work, which is if you haven't done that, that's a really accelerated learning experience and an opportunity to, to do, you know, great things. So I have a lot of relevant experience, which is part of why I launched Manhattan Street Capital almost seven years ago, actually seven years ago, it was March, 2015 Manhattan Street Capital.
What we do, we advise companies and we have a funding platform to help them raise money via Reg D Reg S Regulation A+, and Rule 144A offerings. And we are selective and we add value in every way, shape and form by bringing in the right service providers and staying involved. So we're more the boutique. We're not doing volume for volumes sake. Disclaimers: I'm not an attorney. I'm not evaluation professional. I'm not an underwriter. We are not, I am, we are not underwriters. We are not a broker dealer platform. We are not an ATS platform, which we'll be talking about. And I am not being those things, I cannot recommend investments to you, which I am not gonna be doing. I'm not gonna be recommending particular investments to you in this session.
This session is intended to give you an updated snapshot on the options before you for listing your company, going pub for a public offering, not an initial public offering. That term means NASDAQ and that, and NYSE, that's largely unchanged. I'm gonna give a brief update on that towards the end of this webinar, but a public offering Regulation A+ is a capital capital zero capital O public offering, right? We're get the SEC says you can use the capital letters cuz you are making a public offering and becoming a reporting company by dent of doing a Regulation A+ Mention the recording. We'll send that out later. Please don't record this cuz we'll, we'll make sure that we cut out any ups. If I make 'em and we'll shorten it a little bit and things, post questions in chat. Again, this is not comprehensive. I'm not trying to cover all the bases. There's a lot of material here and it would go to a half, three hours if I was to go more comprehensive.
So first item, what is an alternative trading system? I am following the agenda, which I published in the blog. So you shouldn't be surprised by the, the sequence we're doing what we said we would do. So alternative trading systems have come about by a series of regulatory changes from the SEC. And so really they've started to matter in the last two years and it's becoming a crowded space. It will be a crowded space. It'll be challenging for a while to figure out who to go with. But that's the nature of the beast, right? And then there'll be some full ads and some consolidations and all, and there'll be a fewer options. And it'll be much more clear who to work with. The point is, is though that what is it? It's an alternative trading system or ATS is an extension of a broker dealer.
The thing, one of the things that I love is that they don't have shorting and they don't have naked shorting. Now it might be possible for them to create that option. But to my knowledge, none of them do that. And I wouldn't dream of listing my company on an ATS that provided that feature because to me that is a terribly destructive characteristic of the OTC markets and of NASDAQ and of NYSE that stock brokers can put naked shorts on companies that are relatively illiquid devastate their, a share price as a result. So a lot of what matters when it comes to listing a company is being ready. If you're gonna list it on those exchanges, being ready to protect yourself. And that's hard if you're a relatively early stage company with relatively unpredictable results, obviously, But I, so I love the fact. I advise many companies that, are doing or, or, or discussing a Regulation A+ with us that if they're not ready to have the, all of the plate, the in motion to protect themselves from naked shorting, that they should look seriously at the ATS as an option, as an alternative trading systems, as an option, you still need blue sky state, secondary market filings. You're not obviated. You're not released from doing. From that
Interestingly, there are lots of variations on the theme emerging. So there's some that specialize in certain industries and won't touch others. There's some that are private label. So imagine this you're doing a Regulation A+ you may plan to do a series of them and you want to provide liquidity for, or your investors, but you don't want to share those investors with other alternatives that they might choose to invest in. So you can actually use a private label version of an ATS that you tie to your Regulation A+ then their registration rights, their workload, if you will get getting sorted and being fin reregistered and things applies, and you can make it that your ATS with them is just for your investors with your securities. So obviously that has up and down size, less liquidity, but it's a, it's a place where you are not gonna see you are not enticing them with alternative investments. So that's interesting. I, I, I, I like that. As I, some of these are limited in other ways, some of them are vertical, but you'll see some of them are tied to a funding platforms or a funding platform says, yes, we've got an ATS, but the only people will allow in it are companies that raise money with us.
The costs vary at this stage in the game. You can get better deals because they're all without exception building presence in the market. And some of them are pushing for higher expenses than I think are appropriate. But again, you can negotiate better deals at the moment. You still have that, you know, I think 10 K a month for blue sky filings annually with the state. And I would say, think 10 K a month as about realistically, probably the low end of the range of what you're gonna do for listing fees and staying listed on these exchanges. So I don't that isn't a huge savings over other options, but that's reality so far. Yeah. Mention that mention that the trading fees I've seen so far are generally efficient. I don't see gouging on that level. Again, it helps that it's a competitive, a competitive landscape. And then obviously we'll into which companies are more app, sorry, which companies that have raised money by which methods are, are appropriate to ATSs or ATSs are a good fit for we'll get into that.
The big downside today, which is obvious of ATSs is that they're relatively illiquid, you know, compare their liquidity to being on the NASDA or the OTC QX or QB much less liquidity. But again, you don't have the naked short risk. So that's a big upside, you know, everything's a, everything's a compromise in life. Isn't so limited. Liquidity is a factor that is gonna improve because as the number of companies that choose to use ATSs increases, and as some leaders emerge will get a lot better liquidity. And as a result of the limited liquidity, you are not gonna see obscenely high valuations. You know, right now, I mean less right now than six months ago, but still there are a lot of companies with obscenely high valuations in the market that are marketing themselves really strongly and may or may not have much substance beneath them on the major on the major exchanges because of the state, the bubbly state of the market, which of course is changing. As we speak
Each of these, each of these ATSs, they have their own criterion. You know, some of them are more interested in facilitating reg D companies that have a lot of reg D investors. Some of them aren't they all have listing requirements. So for example, you know, what's the state of the board. Do you have a compensation committee, those sorts of things, some of them are more focused on obviously it has to be a legitimate company, the number of investors, the amount of the, the Nu numerical count of them, the amount of money that's been raised, the amount of liquidity that you have inherent to your company, all of those are different. All of those factors are the usual factors for listing. It's just that the ATS brings a lot more options to the table in a lot more reasonable manner with small, with lower hurdles.
One of the things that you'll see is that maybe with a Regulation A+, then you're listing it on an ATS and you have the annual audit us gap level requirement in the reg that's inherent to the Regulation A+ and six monthly financials. If you go to the QX, the QX will require quarterly financials at the, at the us gap format, right? But not PCA or B and not all audit. And if you go to some of the ATSs, we'll want more frequent, maybe monthly or quarterly management financials, because let's face it, it's, it matters to inform the investors, but I don't see any of the ATSs requiring PCA or B audits or that they be done frequently. So, or it's, you know, you shouldn't expect that to change.
So pros and cons, I've touched on a couple less liquid. You, you know, you're less likely for an investor who owns your shares and has purchased them through an ATS to be able to put them in their swab account than if they are than if you are trading or shares on a, on the NASDAQ goes without saying, but the, the options are improving for ATS is as they become more established to my view, I, I, part of the reason I did this webinar or planned this webinar is because I've always felt that Regulation A+ one of the phenomenally great things I've added is that it provides a way to be public and have a modest reporting obligation, a modest reporting burden. I don't know the SEC doesn't brief me on their intentions, but I love that because so many companies are stuck where they are having a great difficulty living up to their PCA, a O B audit requirements, right.
Quarterly, because they were companies that got demoted from the NASDAQ or NYSE. So I love the fact that it's very pragmatic in that way. And when you combine it with an ATS, then you've got a very pragmatic way of being liquid that doesn't have to cost an arm in the leg. That's, there's huge number of really good companies that are suited to that. And that's why I'm doing this, this, this webinar. I want you guys to be aware that there's a viable option there, you know, biotech companies and other companies that are years away from revenue, they are seriously vulnerable if they're on the OTC markets or, or on the NASDAQ. Right? No question about that. So it's gonna be a very rare company that can go list and survive that, that, that, that experience unscathed. So an ATS is much, much better for the, for companies of that type. It's a fragmented space. Yes, of course. The froth evaluations, you don't get, that's the downside, right? You're not gonna get froth evaluations on an ATS, maybe in the future. Then some of these ATSs emerging get rather large, then potentially high valuations will follow, but we're not at that stage yet today. It's about how attractive is your company? How good a job are you doing? Good marketing it. And if you're doing a raise again, right now, what's the price of the shares.
The advantage is no shorting, no naked short. These, you are not required to have an audit in order to list on an ATS. If the red, if the method by which you raise money, doesn't require it like a reg D then you won't are not required to have an audit just by, because you're going to an ATS. So that's really good. So anything with technically a Rule 144A offering, obviously less management bandwidth is taken defending why your stock price declined 20% last week, right? Don't wanna be in that situation and you need to prevent it. And I mentioned the fact that you can have a private exchange is a very big advantage. You, if for, for some companies, you can have an ATS, which is white labeled. That is, you know, your brand where only your securities are traded, and that's gonna to be very suitable for some companies, look at fundraise.
You know, they've raised huge quantity of capital via Regulation A+ just off the top of my head, I would estimate maybe 1.8 billion, 1.6 billion right now, and they don't list their securities anywhere, but they could do this. They could produce, they could list securities on an ATS. That would be a nice thing for their investors and would make it easier to raise more capital because the, of the attraction of that liquidity we'll get into this further, but the blockchain comp companies that are raising money and and, or have raised money that are blockchain technology, business companies in the blockchain space, there's a lot of viability here that you don't get elsewhere when you want to be listed in the us. And you can actually use the ATS to raise money whilst you are raising money. So in some circumstances that's gonna be really, really a smart move.
So OTC offerings, why do the QB or the QX, well, if it's a Regulation A+ you still only have the us gap or audit requirement, that's lovely. And if your company is robust enough and your team is robust enough, and you're ready to have the col establish the culture where you establish conservative conservative expectations in the marketplace and then beats them then being on the OTC market is a good thing to do, and you can get very high valuations for doing so, so really good, better liquidity, much better valuations possible, better training ground for the NASDAQ. Obviously the big thing being, building a culture internally of the two IPO's to the NASDAQ that I was a part of. I was VP of sales at Ashton Tate, and our CFO didn't have enough cloud with the CEO and the CEO bless his Sox was a little bit too prone to suit from the hip and give analyst expectations that weren't terribly related to the actual plan we had in the company.
So we had some seriously difficult times there. As a result, the sort, the share price wasn't as good as it could have been. The valuation wasn't as good as it could have been. And the institutional involvement as investors wasn't as good as it could have been where we did Symantec. We had a guy we brought in a guy called Bob DY. Who's a good friend of mine still, obviously. And he had the right cultural mentality as a CFO and the CEO in those days, Gordon Newbank delegated very nicely to Bob to let him do it well and communicate to the financial markets, what the expectations were. And as a result, when we took Symantec public, we delivered 16 consecutive quarters of beating our numbers and became very popular with institutions. So a very large mix of our investments would being held by them, which is obviously a desirable thing. So if you do it right, and you, we had a culture internally where we reforecasted every six months and we were conservative, right? And the result was part partly we were doing business, but also we were being really conservative. We were buying companies. When you buy companies, you have, have the opportunity to legitimately make reserves that you can unmake, that you can release it later times. And a strong CFO doing that legitimately can help smooth the, the results of the company. Higher evaluations already covered that. It's easy to get the shares and list them while to get them into an account. Although, you know, the further down the food chain in the OTC markets, the harder it gets
Yeah. Covered those things. Good acquisitions. If, if you are legitimately buying companies as a part of your growth strategy, that is a very good protection along with excellent marketing. When you are exposed to naked shorts, because the brokers that would like to make short, make profits by shorting company stocks, they are less likely to do it. If they're worried that they might lose money, because the day after all, a few days after they put a big short on suddenly you, you make an announcement and the stock price reverses, and they actually lose money, which is not what they're looking to do. Right. So that's a good part of, of a if it's real, that's a good part of protecting yourself.
So now I wanna get into Reg D because Reg D is so much more liquid than, and people know, and now combined with ATSs, that's really, it comes to fruition, right? To my mind. This is seriously good stuff. I'll get to the questions later. It's good. You guys posted questions as you go, and as we go and I'll get to them later I'll answer them in the order. They posted to the extent that I think I can add value. If there are questions there, I can't add value to I won't be doing so. So it, these are there's three ways in which a reg D investor can immediately sell their stock immediately after purchase. One is what's called a section. We have a, we have a an FAQ dedicated to this. And when we send out the, the invitation to look at the webinar recording, we'll include that on the blog page with the web webinar, recording the links to that, and another couple of related relevant FAQs on, on the, the Manhattan Street Capital platform. So don't worry about having to write these down, but section four and 4.1 and a half is a hybrid thingy between a couple of different regulations where a, with an attorney's letter, which would have, would come either from the investor selling or from the company who shares his selling.
Then a section 4.1 and a half exemption allows for accredited investors to sell to other accredited investors immediately. And that letter, basically it says that, you know, the person selling isn't a broker dealer that's involved in some way, isn't an insider, also logical restrictions. So an actual passive investor that isn't an insider by more than 10% of the company, a true non insider investor will get if they pay for it, the attorney letter that gives them that right to sell right away. And section four, a seven allows an accredited investor to sell to another accredited investor immediately when it applies. And it has essentially the same criteria that the section 4.1 and a half has. It's really the same thing in a better organized fashion. And then the credited investor can immediately sell to a qualified institutional buyer, also known as a QIB.
So that's three ways that the company has its investors can have immediate liquidity after buying your shares pretty good. And the last one is what we already know is that after 12 months, though, your reg D investors can sell to the public. Now that wasn't terribly convenient before, but with an ATS that can be really convenient because the public will be there buying their, if they're appealing. So now, what do you have? You have a company that is publicly listed and isn't required to do an audit because it raises money via reg D. It has obligations and responsibilities that I'm not gonna get into all the detail on, which are pretty obvious things. But the point is you now have a publicly company that is trading to the public in the US, and it took 12 months to get to that point post selling the securities.
That's I think a really powerful thing. And the last one is you can sell immediately to that is the reg D investor can sell immediately to an international investor, courtesy of reg S so there's a lot of ways in which, in which reg D is much more liquid than we knew before. And so with a ATS that is willing to allow your company to list your Reg D securities and is willing to provide these kinds of listings, which many of them are that is to say these kinds of transactions, which many of them are that's great, right? I'm not saying you want, you don't want, you wanna provide liquidity to your long term investors and so forth. This is a good way to go. And I don't think most of us have been aware of this. Okay.
So I wanna mention Rule 144A , a liquidity, because it's a special case that I think has a great application. We are raising money for client companies using they're raising the money. We're helping well advise them. But we're bringing all the service providers in and so forth. So I can't say we are raising it because we're not, we're not a broker dealer, but we are enabling them to raise money for Rule 144A , a offerings. The first one that goes live has a target raise of 600 million selling to qualified institutional buyers online because it's allowed to do that. So we are getting, we aren't live yet with that, but it's, it'll be soon. And it's a really attractive company in my view, but I'm not recommending investments. I'm just telling you that those qualified institutions can be immediately liquid on a ATS. And I've spoken to a number of ATSs that are happy to restrict the buying to be other qualified institutional buyers during the first six months.
And, and at the six month point, those institutional buyers are allowed to sell to accredited investors on an ATS. And at the 12 months point, they're allowed to sell to the public. So now you've got a public company that raised money through a 144A and doesn't actually have an audit requirement. Now having said that, you know, let's be real RA if we're, we are including in the 144A offering or the company I mentioned just now that is planning to raise 600 million PCA O B audit because the institutions will require it in that case. And right now the sweet spot, I think for 144A offerings is with very large institutions because they're the ones who have been in funded. So, so generously by the, the FED over the last two years, they're the ones with money burning a hole in their pocket. And for these large raises this it's really easy for them to, to, to obviously to participate.
But they're also very much more demanding, right? So a, a, a family office putting in $2 million via an institutional raise is gonna be much less demanding than a, a, an institution putting in 40 mil that would never put in less than 20 cuz it would be a waste of their time. Okay. So let's be real audit requirements depend upon the investors with which we are engaging. It's not just what are the rules that apply the Rule 144A does not require an audit if one exists, it must be provided, but he doesn't have to do one in theory anyway. So you heard that on the, on the public part, how we got, how that's a viable way to go to be a public company.
So now I'm gonna get into, when does it make sense to raise capital to what to list a, your security while raising capital. So obviously it's high risk to list your stock on, on the QB or the QX whilst raising money. If you've raised enough money during the one year Regulation A+ for example, you can do that. The question is, is it smart to do? And it's only smart to do if the marketing of the company is very strong and we can have high confidence that the company will not be subject to naked shorts, right? So that's a nerve-wracking judgment to make a nerve-wracking decision. So if the management of the company is confident enough in the context of that situation, say it's raised 4 million already and has a lot of investors, which you get when you do a Regulation A+ then the potential does exist to go.
And then why is that a good thing? Well, as long as there's interest and excitement, because some of these companies I'll be raising money are raising money at pretty conservative valuations, relative to what the valuation can be. When on the QB or the QX. For example, Ben, you can see a situation where instead of taking a year to raise 20, 40 million, whatever the amount is, it could be done much faster because people buy are buying at less than the market price when you go to the QB or the QX to sell it. So I just, it's obviously risky. So it's not a no brainer. That's another advantage of an alternative trading system. I'm not selling alternative trading systems. I don't have stock in any of them. You know, I love the fact that they exist. That's what this is about. I'm not biased. You know, there are some that are doing some really great things.
There are some that are investing lots of money to build their scale. And that's T zero right there, but there are lots of good companies doing good things in the ATS space. So just so you know, I don't have any kind of conflict of interest going here, but to my mind, this is a marvelous development. That's why I'm doing this webinar. Okay. So you heard the thing there. So being listed on an ATS for raising money is a lower risk proposition. You're not gonna see obscenely high valuations, but if we market it really well, we could create a situation where we're selling shares. Let's say we, you know, the issuer is selling shares at $4 and they might be trading at five on an ATS, cuz people love the company because of that most recent news announcement, the company just made because let's face it.
Some of these companies, we are so fortunate that Manhattan capital, that we have amazing companies that have been approaching us in the last year that are doing offerings with us. It is a astound. I mean the quality of these companies compared to seven years ago is just night and day. So they've got substance, they've got revenues, they've got profits and solid growth. So they're in a whole different, but situation than a lot of the companies that we've seen and worked with and other companies doing Regulation A+ in the past, what's happened in the last two years. Courtesy of COVID is that crowd investing online investing has become credible. So we get institutional investors participating that wouldn't have never, ever looked at it before. Things of that. I and the caliber of companies taking it seriously. Some of the just amazingly wonderful companies that I feel, and I am really privileged to be dealing with this. I'm sitting in a seat where I'm seeing such great companies, it's a, it's a lovely journey. So those companies are much more likely to be able to, to market what they're doing in order to have a much faster raise, right? That's a lovely thing.
And again, if the strategy is to make acquisitions, you can do them during a raise. You're not restricted to doing acquisitions post raise. That's another advantage, right? Building excitement in the company during the raise and benefiting from it and making it less expensive to market the is and happen quicker. A win-win scenario, obviously bearing in mind all the, all of the circumstances.
For international markets as to say listing internationally, we'll get into this in a little bit. We'll get into this too, in the blockchain part of this discussion. Sorry, that was, that was slack interrupting. I don't, haven't figured out how to silence slack yet. So You may be some of these things are gonna be obvious to some of you guys, but not, not all of them. I'm sure. So, so the SEC doesn't consider the, the fact that your company's listed in Canada or in the UK or in Australia to be significant. That's not relevant to them. As long as the company is isn't breaking any laws and rules and things. They don't consider those to be significant. So that's interesting. But the real point is that we're talking with ATSs about 144 A's and reg D's and Regulation A+'s companies, that list for those reasons, because you can internationally Regulation S investors are also, it's possible for you to make your Reg S investors liquid right away. As soon as you have enough of them, who've invested in your race. So play it forward. You don't need a reg S with a reg a plus, cuz it works internationally anyway.
But in a Reg D scenario where you've paired it with a Reg S for international investors, then as long as you list your securities on international exchanges, that will rigidly constrain it, such that those international investors can only sell to other international investors, but not to us investors for 12 months after they purchase the security. As long as you may make sure of that. And there are many exchanges internationally where you can do this, then you can list your, your securities internationally, as soon as you raise enough money to make it interesting to do so. Now your Reg S international investors can be liquid too. So it's less restricted in, in, in the sense that us investors are more restricted for obvious reasons. Cuz the SEC does a great job of protecting all of its our us investors. But anyway, you get the point, right? Pair the two together, you could be liquid fairly early on in ways you, that you may not have been aware of and internationally to, okay. The keys to doing this online listing whilst raising money, wherever you are doing it, or is there enough enthusiasm in the company and is it being marketed really well then? Do you make sufficient new news announcements and so forth?
Okay. Covered that, covered that. Now I get into blockchain companies kind of a natural away from where we just were at this point in time, the SEC is far more restrictive when it comes to blockchain offerings than they were two years ago. That's just the fact of the matter. It's almost impossible to get a Regulation A+ through the SEC, if it's a blockchain offering. And even if it isn't even if it's a non blockchain offering, but it, or, but there's a blockchain component, whether it, whether it's a tool or an instrument, but it isn't the primary part of the business that is slowing down Regulation A+ to get through the SEC. So that's really important to be aware of, unless this is your, you know, life's work a religious thing where you wanna spend years and a lot of money going down that you aren't gonna get an S-1 IPO or a Regulation A+ offering qualified in the, in the case of the term, qualified applies only to Regulation A+.
Plus when it's a blockchain offering that this isn't gonna happen in any sane time of timeframe. Now, when the, the process that the president has announced has completed, I expect that things will get better because there'll be more clarity. And then the SEC and other entities may become more straightforward to deal with, particularly the SEC. But, and I do think that the announcement has simplified things because you can imagine being a regulator at the SEC and you know what you know, and you know that there's, you know, reluctance and a lot of concern about all these crypto things going on and you now, and you also know that the, the president is gonna to be making executive orders and statements of intention and basically getting things in a way that could be, you don't know what's gonna come out of it, but it could be even more restrictive.
So you can imagine that that made things worse. Now we're past that I think will, we'll see things will be a little bit better, but when the regulations are actually defined and things can get a lot better because frankly, what the president announced is much more pro blockchain and crypto than what we, what we saw before. So that's, that's I think a good thing for later, when the regulations emerge point being though today, what do you got as a blockchain company? You've got reg D and reg S those are, and reg CF. We don't do reg CF. I'm not an expert or reg CF as much as I am on the other, other funding system. So reg CF is good. It's, it's a very good system. So of course you've got a, the fact is that when you look at it, just from a pragmatic standpoint, why is it that you can do a reg D and a reg CF without getting blocked?
It's because you don't go and ask permission of the SEC you file a notice with the SEC in both cases. So you still gotta do it legitimately because later the SEC can jump on you from a great height and make life utterly miserable or worse, right? So you gotta, whatever you do do in lock chain space, it has to be done legitimately, but reg D reg S is a good combo that we are, that we are focusing on because we choose not to do reg CF. So what does that mean? You know, I've mentioned already, right? The, it isn't ideal, but if you list, if you do a token off via reg D and reg S then in the international market, as soon as you raised enough money, the international folks, let me just reduce the back then.
Might reduce the shadowing weirdness there anyway. So you can list the secure the token, the block, whatever it might be internationally, as soon as you've got enough investors, reg S in the ways I already described, and you can list your reg D security in the US, as soon as you've got enough investors to make it worth doing, because they are allowed to trade. You're not on ATS. So to my mind, it's not ideal because we, you know, many of the blockchain companies that approach us want to, to bring what they're doing to the masses. They want the investors to be everybody in a lovely, democratic way that is not currently viable, right? So what do we have? We have this, which is pretty good, because 12 months after starting the journey of list and having listed, then you can not really start in the journey.
12 months after having raised the money in a reg D model in the us, your securities can be traded to the public. The public can be buying them and selling them via ATS, which is a marvelous thing. Of course, being able to do it sooner would be nice. But think about the alternatives, the Regulation A+, and an S-1 IPO. They're not instantaneous things. It's not like you start it today, and you're all done and washing your hands. 60 days later, there's a lead time there too, right? It's just the lead time is all the preparation and the filings and the comments from the SEC. So the time to liquidity for the public is gonna be similar, right? We're thinking about
How are we doing on time here? Okay. Running out of time. So liquidity for insiders and early investors, it's not different than you already know. In the case of all of these, the, the big issue is that when you are an insider, you are limited by the SEC as to when you can, when you can sell your securities. And essentially the biggest moving part here is that if you are on an ATS, for example, and you choose to produce management financials every month, and you do that responsibly, there'll be a window every month. Then the insiders can sell, obviously on an ATS, the liquidity is not as strong. There's a limit to how much of the volume and an insider can be selling. But I don't see the need to go into too much detail on this, but the point is that ATS provide you a less liquid way, and it's obviously best to have liquidity for insiders to sell. But The key item is making management financials available on a more frequent basis than you are required. And that is not an onerous thing compared to PCA or B audits every quarter, that all those demoted companies that are on the that are on the O see markets and similar have to live up to.
Okay, so this is the last piece of content. So I have a little bit of time left for questions. Um Regulation A+ has that IPO update. So there are some companies that are uplifting ver exit sober, safe trust, stamp, assuming that they complete their journey. But it's more interesting to look at the IPO fund because that's where the excitement is and where really the, the bigger difference is so night scape night scope, excuse me, they went public in January of this year. A clean went public in November of last year. Those are the two most recent Regulation A+ IPOs to the NASDAQ. In both cases, their stock is trading down in the case of night, night scope. It's down from $10 to five and a half today, and arrow cleaners down to around $4 from 11. But, you know, to be fair to them in both cases, their early stage companies, you can debate the merit of being public.
You know, there's a lot of work involved in protecting yourself. And also the market's not quite as exciting right now, not quite as bubbly as it was in both cases when they went out. Nevertheless, two, those are the two most recent IPOs. And in terms of IPOs coming along, we have a client that I'm not soliciting an investment. When I say this, I'm just mentioning their name. GATC Health is a biotech company that is intending to conduct to, to culminate their Regulation A+ they're a client of Manhattan Street Capital they're intending to go to the NASDAQ and they have serious interest from high quality underwriters in doing so. So that's a good company, but we have two other companies that are engaged with us in Regulation A+, that 10 to list on the NASDAQ. And it's still gonna depend at the end of the day.
It's gonna depend of course, on the climate as to whether that takes place, right? The success of the raise, as well as the state of the market. And that point at that point in time, the thing next thing I want to touch on, because it's highly given the state, given the volatility in the markets we've got right now, we don't know what's gonna happen. If the market goes into a severe tailspin, et cetera, et cetera, of course, it matters to know what's the likelihood of being able to successfully raise money in that context online. So I can't guarantee anything and I'm not gonna try or this sleep, but what we experienced that was very interesting to me that I want to relate is that during March of 2020, when the wheels fell off the bus in the, in the us markets, because the realization came that this COVID thing is gonna impact the us and the world in a bigger way, right?
That was lot of volatility there for three weeks. The markets were all over the place in a, in a very big way. During that three week period, the Regulation A+ companies that are, that are climate up are clients that were raising money, saw their cost of investor acquisition increased by about 25%. Some of them paused for obvious reasons, but the point is that it didn't stop. It was more expensive during a very scary time. When most people, many people were looking at their IRAs and say, whoa, whoa, scary time should have done it differently. Right? So in that, to my mind, that was really telling later on, we got lower costs by may of 2020. The cost of acquisition was substantially lower, 15% lower than normal, roughly speaking, because people were stuck at home and didn't have much to do. So we had two advance, is there one was less cost of lower cost of acquisition.
And the other was people having to look having to is the wrong word, having more time at their computer and on their phone, exploring this online investing thing, and then taking it more seriously. So really this crowd investing business has come of age in it's very, very beneficial and beneficial to all of the players. And we are experiencing, as I said earlier, amazing companies that are themselves taking this online investing thing more seriously than we ever saw in the past. Okay. So I just wanted to say that, you know, you need to understand what the likelihood of success is. If we do everything else, right? My sense of it is that in a gradually down trendy market, that will be able to raise money from main street investors, because that is the sweet spot of Regulation A+, anyway, I'm talking mostly about Regulation A+ here institutions.
It's a different thing again, in Rule 144A because the main reason I think that they're, that this is a really good time to be pitching companies to them. If they're the right companies, is that they don't want to go along the market. They want to invest in environmentally sensitive companies, a new, I mean's a, a new development, and they want to put money into companies that tremendous growth prospects. And yet that are not where there's a lot of upside because the upside is uncorrelated to the market, right. They wanna put money to work intelligently. So I think right now that's true. Even with volatility, the volatility just, just goes to show what they already knew, which is you can't expect the market to go ongoing up forever. And, you know, we don't yet know how bumpy it will be when it corrects, how it corrects, et cetera, et cetera.
So in those cases, that's the way I, I view it at least. And in the case of Regulation A+ when you get down to the bras tax of it, most of the easier to reach investors are main street investors. And only half us has old have a stock brokerage cap. So we are raising money in the main, in Regulation A+ from people who are not nervously looking at their stock brokerage account. Cause they don't have one. I say in the main, I don't have the precise breakdown, but there's an awful lot of people who are investing in Regulation A+ online cause they love what the company does. And because they bill what it's claiming in terms of its upside potential for them. And then later on, they'll have to open a stock brokerage account and so forth, Excuse me. Okay. So now that concludes the prepared statement part of this webinar, and I'm happy to stay longer than 10 minutes from now or eight minutes from now, if there's enough questions, but I'm gonna go to the questions here and do my best to address them. Bear with me while I lean in to see the questions
My email is posted in. If you'd like to email me to talk to my company or about working with you, or if you need feedback on something happy to have you email me. You did that, Somebody asks, can you, can infrastructure be included for your funding? Not quite sure what that means. You can raise money for infrastructure. We have infrastructure to help with the funding. That's why, what we do with our platform is a hell of a lot of deep things being done in our website that go away beyond being an ordinary website to facilit date investing. Okay. Somebody's saying they've got a great company. Yeah. Initial cost of doing a Regulation A+ to front loaded expenses. Assuming a simple of what hundred and 50 K couple at that.
But that's not, you know, the big expense going forward is the cost of marketing outreach to bring in investors, unless you've got a giant audience that love you and aren't gonna invest without that expense. Right. You know, you don't get the outreach to fresh. My, I call on the great unwashed masses, which isn't meant to be a, a negative statement. The people that never heard of you, right? Social media advertising is the most effective vehicle to reach those folks. And what do you do with the, with the Regulation A+ we go live, we raise money initially. It's not efficient because the targeting the advertising messaging, the key messages on the landing page all need to be tuned. So the real issue there is don't spend much money up front, get the efficiency optimized as soon as possible, and then spend a lot more money raising money. And the biggest expense is advertising outreach. Okay. Whoops, hold on. I'm not handling this chat box thing in the most efficient manner.
Listing partners. What? Okay. Somebody's describing what they do. That's not a question. How many Regulation A+ companies pay a dividend? I'm gonna say 20% rough numbers, Debt offerings are obviously paying interest. Aren't they real estate real estate's more than 65% of capital raise. So what I just said is wrong. Almost all of the real estate companies are paying. I'm thinking 20% on the rest of the, of the C With AI, we create dividends on our software that will solve a short problem. Good. The shareholder base is great for the Reddit crowd. Yeah. Has to be a company that creates lots of products. The NYSE put a moratorium on Regulation A+ what happened was that there was a lot of momentum and Regulation A+ going IPO's in 2017 and the beginning of 2018. And then one Singaporean based company broke the rules. They
Started a brand new us company raised Regulation A+ money. And then I'm sorry, qualified their Regulation A+ and instantly bought their Singaporean company, which was apparently their intention the whole time, without including that in their filings with the SEC, you don't get away with that. You're supposed to keep the SEC informed the SEC would've required them to audit the us, the Singaporean entity. So they were delisted. And that was, that resulted in lots of reg red faces and in as imposed some restrictions with actually one restriction, which is a Regulation A+ IPO to the NASDAQ, the company must have a year of operating history and the NYSE put a moratorium on Regulation A+. So what we're seeing in, in recent activity is the rebuilding of momentum for Regulation A+. I wish firstly, that those go, I didn't long film was the company name. I wish they didn't do that cuz it was unethical. And it was obviously a bad thing in the first place. And if they were gonna do it, I wish they'd done it in an S one. So it wouldn't have slammed Regulation A+ as much it wasn't specific, their practice was something you would've they'd have been slammed for. If they'd done it in an S one as well.
Can you provide some insight on using reg D Rega and Regulation A+ to sell token assets, do that, do not represent equity or debt for listing? The thing is you can't get a Regulation A+ through the SEC that has token offering involved in it, blockchain old in it. So you can't really do that. It ends up being reg D and maybe reg S but not Regulation A+. And the same thing with an S one, you're not gonna get an S one through the S E for a blockchain company, token assets, even if they don't represent equity, it just is, it goes into this bucket of blockchain stuff that the SEC sets a side has a separate group look at, and it never gets anywhere for a very, very long time Particular concern on the ongoing audit obligations on projects that are not profitable well true, but you know, audits are providing accurate data so that people have confidence that the company is doing what it says it does.
That isn't the problem. The problem is what are the results and what are the prospects for great results going forward? So, you know, if your company has A $200 billion revenue potential over the next few years, because that's the size of their market, then the fact that you're losing money right now, isn't really a big deal, right? If people buy into the prospect and you have enough barriers to entry that it's this high confidence or sufficient confidence that your business is going places, but you're right, it's easier if you have revenues or profits and predictable results. So another some Dr. Hassan is describing what he does in order to get help. Okay. That's not a question. Okay. Too many posts, the same thing.
Well, at least I'm getting past a lot of stuff here. Vertically. The website for Manhattan Street Capital is manhattanstreetcapital.com spelled exactly the way it sounds, which is not a coincidence. I don't understand your concerns about naked shorting on the QB or the QX NASDAQ and the N Y C naked shorting. Isn't illegal, not for a stock broker. It's, it's short, it's illegal for you and I for regular people. But stock brokers don't have to have borrow in order to put a short, so they don't have to have, it's a naked, short, they are allowed to do that. The S E regulation says a stock broker has to have reasonable access to borrow. That is a big gap. It's a big hole. You can drive two buses through. And that is why it's a regular practice. And it's not individuals. As I said, it's,
It's not illegal. It's legal. The, I don't know why the SEC doesn't change that. I would like them to change that. Cuz it's so destructive to so many companies. I don't wanna maximize those stock brokers profits at the expense of killing companies. You know, how do they dig themselves back out? It's not easy, right? As, as a lot of companies can tell you, okay. So any more questions put 'em up now, but we're running close to the end of the window. So I will re review a couple of things. Thanks Ákos for putting this together. You you're really good at this young man. I appreciate you greatly, as I said earlier, he's in Hungary. So he is not too far away from what's going on over there in the Ukraine. Comp question is what types of companies are optimal for Regulation A+ we're a venture fund of funds and considering Regulation A+
Venture capital is restricted for Regulation A+ it's a long discussion. Please email me and we can discuss it. The types of companies it comes down to, if apart from the regulatory restrictions, excuse me, the being able to market the company successfully to investors online. Is it simple enough? Is it attractive enough that it will engage investor interest can cost effectively? That's the single biggest restriction from a venture fund point of view. There are issues there where, you know, you fall into, into, you can easily fall into a mutual fund bucket, which is a whole regulatory challenge. It mutual funds can't use re plus
How can a real estate company use Regulation A+ to raise funds, to require properties with great cashflow dividends by doing a Regulation A+ usually is a debt offering. That's very commonplace more than 65, at least 65% of Regulation A+ capital raise. The date has been through four real estate debt funds. So not equity so much putting buying equity in a company that buys real estate is offbeat. It's confusing to people, but real estate is a category. It's been a good run of course, but real estate whilst the market is strong for real estate, which is quite strong right now. The prognosis for a Regulation A+ for real estate offerings is quite strong. When you see 50, 60 million, 40 million in a Regulation A+ it's frequently a real estate transaction. We've done a few. See we've done, our clients have done a few. Okay. So going back to our, I was doing to wrap up here we'll be sending out an email link to a blog post, which will include this, this video, this webinar with an index.
So you can just watch the bit you want to watch. It will, that blog post will also have links to information about ATSs and more detail on reg D liquidity those things. Yeah. And again, all the disclaimers, please read them. And what I said earlier applies thank you very much for being here. I hope this has been useful for you, which is the primary purpose of this, of, of having these webinars. Of course. Yeah. Thanks for taking your time. I hope this has been worthwhile for you. Any feedback, welcome. And again, email me, my email's in the chat box. I'm happy to to help you to the extent that I can to figure out the best instruments to use that and that are available and the best way forward. That's kind of what we do, right? We, we don't want to waste our time and yours doing things that are preordained not to work.
We want to find the things that will work to have maximum success. My two goals in Manhattan Street Capital are only do offerings where we can succeed and the companies are great. And where investors will later celebrate that they invested in those companies. Those two goals successful raises where investors will celebrate later because that is what makes will make our us a long term success as a company. Okay. Thank you very much, guys. Thanks again for being here. Have a great day and look forward to talking with you again in the future. Thanks, bye.
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You can learn more about investing in Regulation D and Regulation A offerings from the SEC or FINRA.