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Considering the New IPO-Lite? Breaking Down the Stages of an SEC© Regulation A+ Offering

Publisher: Forbes
Author: Michael Raneri

Starting June 19, 2015, private companies have a new way to raise capital.

Spurred by the JOBS Act, the SEC© has approved changes to the little-used Regulation A that will allow companies two newly defined options to raise up to $50 million from both accredited and non-accredited investors.

These regulatory changes come with some strings attached – in the form of fairly stringent disclosure requirements – yet they have the potential to create real change in the world of private companies looking for growth capital. Investment opportunities under the new Regulation A+ rules, defined as Tier 1 and Tier 2, can be offered to the general public. This makes them very different from Regulation D offerings, and means this is the closest we’ve come so far to a more democratic form of “equity crowdfunding.”

The new Reg A+ offerings won’t necessarily work for every company. The disclosure requirements, and associated legal and administrative costs, might mean they’re best suited to later-stage private companies. It essentially becomes an intermediary step between being private and going fully public – a kind of ‘IPO-Lite’ if you will. At the same time, it’s not inconceivable that Reg A+ will be considered by early-stage startups, too.

The new Reg A+ offerings won’t necessarily work for every company. The disclosure requirements, and associated legal and administrative costs, might mean they’re best suited to later-stage private companies. It essentially becomes an intermediary step between being private and going fully public – a kind of ‘IPO-Lite’ if you will. At the same time, it’s not inconceivable that Reg A+ will be considered by early-stage startups, too.

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