Regulation A+ IPOs
Regulation A+ is a relatively new, but already proven funding method which allows IPOs to be conducted to the NASDAQ and NYSE. With Regulation A+, companies can raise up to $75 million of capital per year by selling their shares to accredited and main street investors. A company that completes a Tier 2 (most Reg A+ offerings are Tier 2*) Reg A+ offering can choose to list on the NASDAQ, the NYSE, or on the OTCQX or OTCQB. Companies that are prepared for the cost of reporting for a full NYSE or NASDAQ listed public company are able to use the Reg A+ route, as an alternative to the traditional underwriter method.
One major benefit is that companies are allowed to promote their offering to all investor wealth levels, worldwide, instead of having to adhere to the traditional Quiet Period. Another benefit is that in most cases, there is no requirement to meet a high minimum investment amount to have a Reg A+ go effective. The usual NASDAQ or NYSE listing minimum will apply, however.
Because the maximum for Reg A+ offerings is $75 million of capital per company per year, this new route to an IPO applies best to small-cap companies. Since the IPO window for these companies has largely been closed since the decimalization of stock trading in 2001, Reg A+ is opening the IPO window for them after a wait of 15 years.
Briefly about the timeline schedule and costs
The Form 1-A Registration process with the SEC to gain Qualification for a Reg A+ is far simpler than for an S-1 Filing, and the average time to get Qualified is 90 days, the cost for legal service providers to conduct the Form 1-A filing range from $75k.
Marketing costs will range from 2 to 6% of the capital raised from consumer investors on the funding platform in most cases. By establishing a low minimum, companies can conduct an early first closing in their Reg A+ offering and from that point onwards, fund the ongoing marketing costs from investment proceeds. Two year (or less if your company has less than 2 years of history) audited financials (US-GAAP) are required prior to starting the SEC filing. Audit costs will depend on the auditing firm and the complexity of the company. After listing the company must upgrade to PCAOB Audits.
Most Reg A+ IPOs will need to involve Underwriters to add to the consumer investor demand that the marketing agency campaign will drive to the Reg A+ Offering on Manhattan Street Capital. A reasonable estimate for all-in costs is in the 10% range, including Broker Syndicate fees, Transfer agent and escrow fees where applicable and Manhattan Street Capital fees. For the Manhattan Street Capital fees click here.
* Tier 2 Reg A+ Offerings make sense from $4 Mill up to the max of $75 Mill/company/year. Very few Tier 1 offerings are being used at this stage because of the additional cost and time involved in meeting state Blue Sky reporting requirements that apply for Tier 1.
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.