A few months ago, we wrote that Regulation A was at a crossroads—SEC qualification activity of Reg A+ deals was at an all-time high, and while regulators were tinkering with ways to increase use of the exemption, issuer scandals were calling Reg A+’s long term viability into question.
Since we last checked in on Reg A+ on this blog, the space has continued to experience a mix of disappointing and intriguing developments on the capital-raising and regulatory fronts:
- In the second quarter of 2018, the SEC qualified only nine new Reg A+ offerings (not used for merger or other certain other purposes). This is the lowest quarterly total since the fourth quarter of 2015, when the first deals filed under the newly expanded Regulation A made it to market.
- In May, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act, which among other things, allows Exchange Act reporting companies to issue securities under Regulation A. OTC Markets called it a “pivotal milestone for smaller companies and issuers.” CEO Cromwell Coulson believes that the new regulation will “increase the number of public companies that can efficiently access our capital markets”—through Reg A+.
- The Regulation A+ Improvement Act, which would raise the maximum offering amount under Tier 2 to $75 million, is still awaiting action in the Senate after being passed by the House in March.
- More cryptocurrency issuers and firms are seeing Reg A+ as a compliant way to undertake ICOs, even if it does pose some limitations.
- Hightimes Holding Corp. (which yes, publishes High Times Magazine) recently issued—through Regulation A—the first public offering in history that will accept subscriptions in cryptocurrency such as Bitcoin or Ether.
JOBS Act 3.0
However, it’s what’s been dubbed as “JOBS Act 3.0” that may most critically alter the prospects of Reg A+ and small capital formation in general in the near future. Officially known as the JOBS and Investor Confidence Act, versions of this bill have been passed by both the Senate and House but must be reconciled through conference committee or Senate action before going to the president. JOBS Act 3.0 is really a package of 32 different pieces of legislation aimed at streamlining regulation to spur capital formation for small- and medium-sized U.S. companies. Among other important measure (helpfully summarized by Skadden here), JOBS Act 3.0 would broaden the definition of accredited investor to include many financial service professionals, relax restrictions on general solicitation in certain contexts, and authorize the creation of “venture exchanges” for the trading of emerging companies not yet publicly registered, including Reg A+ issuers. These venture exchanges could provide another path to liquidity for Reg A+ securities, in addition to listing on an exchange or with the OTC Markets.
Interact with FactRight’s database
Meanwhile, below is an interactive summary of FactRight’s Tier 2 Regulation A database, updated for offerings qualified through the end of the second quarter. The charts below are dynamic; if you click on a single data point in any chart, it will filter the data displayed on the sidebar at left and in the remaining charts. Hover your cursor over a chart for additional information.