Reg A+ Quarter 4 Overview: Waiting for Legislative Upgrades

by Brandon Raatikka

After the second quarter posted the lowest number of new issuance qualifications during a quarter since Regulation A was reformed, qualifications bounced back in the third and fourth quarters. Overall, 2018 had the same number of Reg A+ qualifications (not used for merger or other limited purposes) as last year—75.

It’s been a while since we’ve covered Reg A+ activity here on the FactRight blog. Below are updates on some items we mentioned last time—unfortunately, acrimony in Washington is frustrating Reg A+ improvement efforts that once had bi-partisan momentum. Also, a couple anecdotes illustrate that issuers continue to utilize Reg A+ for innovative securities offerings:  

  • In December, the SEC released final rules that allow Exchange Act reporting companies to issue securities under Regulation A without having to comply with Regulation A-specific filing requirements (as Exchange Act filing requirements are more robust anyway). We’ll see in the coming quarters whether larger issuers will avail themselves of Regulation A in lieu of other ways of raising relatively limited amounts of capital, like through private placements.
  • The Regulation A+ Improvement Act, which would raise the maximum offering amount under Tier 2 to $75 million, was passed by the House in March 2018, but is languishing without subsequent Senate activity.
  • Meanwhile, some are calling for reform of Reg A+’s more modest JOBS Act sibling, Regulation Crowdfunding (Reg CF), including expansion of maximum offering amounts to $20 million (from $1.07 million). In 2018, $85.4 million was raised through Reg CF offerings.
  • More importantly, Congressional action on “JOBS Act 3.0” has also stalled. Most relevant to Reg A+ was the provision that would authorize the creation of “venture exchanges” that could provide a viable secondary market for Regulation A and other securities.
  • Digital securities offerings appear to be headed to the Reg A+ space, and soon.
  • In December, the SEC qualified a $50 million offering for LunaDNA, LLC. But it’s not accepting dollars or cryptocurrency —investors will “capitalize” the company with certain health and biological-related data. Each data type has been assigned an estimated fair market value. An investor opting for the full bio disclosure/subscription would be granted 1,286 shares valued by the issuer at $90.02.

Interact with FactRight’s database

As we always conclude these posts—below is an interactive summary of FactRight’s Tier 2 Regulation A database, updated for offerings qualified through the end of the fourth 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.

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Filed Under: Regulation A+