Reg A+ and its Flexibility

When most people think about Regulation A+ (“Reg A+”) they only think about low-level crowdfunding.  But Reg A+ is really so much more than simply a crowdfunding mechanism.  Besides being powerful due to the ability to use advertising, general solicitation, and access your customers, it is incredibly flexible..  In fact, it may be the most flexible way to raise money around.

If you choose to use Reg A+, there are various levels that can be achieved.  Let’s take a look.

Remain private – This is the mostly widely used option for a Reg A+ company, the majority of all filings.  You get your Reg A+ qualified, raise money, and report semi-annually.  However, even though you report publicly, for all intensive purposes, you remain a private company.  No ticker symbol, no trading stock.   For the purposes of this article, any company that is not a 1934 Exchange Act company (a public company) is considered private. 

Remain Private with a Public Ticker – This is a seldom used option but one that can be very valuable and one that many in the space thought would be widely used at the inception of Reg A+ about three years ago.  The OTC Markets have provided a path for Reg A+ issuers to both remain private and have a ticket symbol allowing the stock to trade like a micro-cap public company.  This can solve the issue of a private company having no liquidity in it’s stock (and you don’t even have to undertake an ICO/STO). The drawback is that like a public company, you now have a stock to support which means public relations, Investor relations, and increased costs.

Go Public – Even though this is the second most used method of Reg A+, less than a dozen companies have used this method to date.  Going public with Reg A+ is a great way to become public (become a 1934 Exchange Act Company) with slightly less burden than a traditional S-1 filing, while also allowing the Company to access a wider range of investors.  Through this method, a Company can go through a Reg A+ filing, and come out the other wise with a ticker symbol that trades on a national Exchanged (i.e. NASDAQ).  The raise is limited to $50M which tends to mean only small IPO’s would work.

If you are thinking about using Reg A+, make sure you plan your end-game.  Think long-term.  Get advice from the various service providers you plan to use: legal, bankers, accountants, marketers, etc… Service providers in the industry can generally provide insight on what might work best for a specific company’s profile.

dbbmckennon is a full service CPA firm with offices in Orange County, San Diego and Santa Monica.  We specialize in companies filing with the SEC and utilizing equity crowdfunding through Reg A+ and Regulation Crowdfunding. For additional complimentary information regarding this topic or other questions you may have please call one of dbbmckennon‘s offices located in Southern California or contact us here.