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The First Reg A+ IPO To Deliver Rapid Online Investor Traction; Learning From Arcimoto's Success
"Fun Utility Vehicle" company lists on NASDAQ after successful Reg A+. How'd they do it?
Click here to read this article written by Rod Turner for Forbes.
The Arcimoto Reg A+ IPO to the NASDAQ has now listed and is trading with the ticker symbol NASDAQ:FUV (which stands for "Fun Utility Vehicle"). Arcimoto is the fifth Reg A+ IPO to complete and list on a major exchange in the last four months (and the fourth to list on the NASDAQ). Here we explore the unique aspects of the Arcimoto capital raise.
Arcimoto is the second pure EV company to go public, the first being Tesla. The stock initiates at $6.50 per share , the offering has raised approximately $19 million. The implied company valuation at the listing price is $99 million.
The company has developed an innovative electric powered three-wheeled EV. It has a base price of $11,900, a range of 70/130 miles, 230 mpg(e) economy and delivers brisk acceleration with a responsive and fun driving experience. More on the company and the Arcimoto electric vehicle.
“We started out planning to raise $10 million but we got enough traction early on that we decided to raise our maximum. We have now raised just shy of $20 million as a result,” said Mark Frohnmayer, CEO, and founder of Arcimoto.
Mark continued, “Regulation A+ is a breath of fresh air. After 10 years working in the desert of corporate finance, we did this raise in just 4 weeks!” Mark is referring here to the time from first going live to investors till completing the capital raising process. The whole Reg A+ process takes four to six months or more, and the offering can last as long as twelve months if a company chooses.
John Hullar, CEO of underwriter WR Hambrecht, said, “Mark is a passionate spokesperson. Arcimoto was a strategic, early-stage investment for our venture capital portfolio. We use software analytics to assess opportunities and qualify disruptive companies – and it highlighted Arcimoto as a disruptor for the automotive industry. Arcimoto is making a relatively early public offering, which is part of our strategy for our venture portfolio companies and disruptive growth companies in general.”
“The broker-dealer channel worked quickly and that encouraged us to compress the time schedule for the rest of our capital raising process,” continued Mark.
Robert Malin, Head of Capital Markets at WR Hambrecht, said, “Mark recently brought the Arcimoto SRK to New York City and arranged for WR Hambrecht's broker-dealers to test drive it – there's no substitute for personal exposure to a new drive.” Malin says that the hands-on driving experience worked very well to motivate the 18 member broker-dealer syndicate that he built.
“Arcimoto had an effective online subscription process that levered the company's marketing,” John Hullar added. Arcimoto's marketing worked well to draw in online retail investors, and these investors brought in almost $4 million of capital in four weeks. That is an impressive rate of investment online. Arcimoto raising $1 million per week online at modest marketing cost shows good potential for other companies considering Regulation A+.
The fact that the Arcimoto EV is a consumer-appealing product is a key factor in cost-effectively reaching investors that will back up their enthusiasm with an investment. Consumer appeal is a key component of successful online investor traction, while Reg A+ is building credibility with accredited investors and institutions.
Regulation A+ provides the ability to use many marketing channels to promote offerings which is a significant advantage over a conventional IPO and benefited the Arcimoto transaction significantly.
Arcimoto is an unusually frugal company, and this comes in part from their location in Eugene, Oregon. “Scarce Venture Capital availability in Oregon has caused entrepreneurs to go 'The Oregon Way' which is to find a way to make good things happen in a very cost-effective manner out of necessity,” said Mark, CEO.
This background highlights another benefit of Reg A+, which is that companies can raise capital regardless of where in the US or Canada they are located. Merit drives success, not location. This is a refreshing aspect of Regulation A+.
Many company CEOs tell me they expect the SEC filing process will be cumbersome and slow. My experience is the reverse, and Mark confirms this. “The SEC has been fantastic to work with, highly efficient and responsive,” he said.
Another interesting twist in raising capital online is that the offering video plays a highly important role. Here is Mark's take, “This is the first time I've raised capital without having a presentation deck - instead we really focused on the video component. As we've honed our product offering, we've also honed our in-house creative efforts in order to tell the story as concisely as we can."
Mark continued, “My advice to entrepreneurs raising capital, either privately or in a Reg A+, is to distill your full pitch into a video no longer than five minutes in duration; every single thing you say must have clear value, it opens up the rest of the discussion to focus on the particular concerns of your audience."
The Chicken Soup For The Soul Entertainment (NASDAQ:CSSE) Reg A+ IPO of four weeks ago and the Arcimoto IPO are both good examples of companies with strong consumer appeal which improves the likelihood of success in Reg A+ offerings as described above. There are three or four consumer appealing Reg A+ offerings that aspire to list on the NASDAQ or the NYSE in the pipeline for the coming months, so market permitting, we may see further gains in momentum for Reg A+ into the first quarter of 2018.
Disclosure: I hosted the offering on Manhattan Street Capital's website. Arcimoto was not charged for this service.
Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital marketplace 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.