Reg A+ IPO: How Much Does It Cost and How Much Can You Raise?

This is a new and in some cases far better way to conduct an IPO to list on the NASDAQ or the NYSE.

Reg A+ is a new classification of stock offering that enables main street investors to buy shares in private companies. A company that completes a Tier 2 (most Reg A+ offerings are Tier 2*) Reg A+ offering can choose to list on the NASDAQ, the NYSE, or on the OTCQX or OTCQB. Companies that are prepared for the cost of reporting for a full NYSE or NASDAQ listed public company are able to use the Reg A+ route, as an alternative to the traditional underwriter method.

One major benefit is that companies are allowed to promote their offering to all investor wealth levels, worldwide, instead of having to adhere to the traditional Quiet Period. Another benefit is that in most cases, there is no requirement to meet a high minimum investment amount to have a Reg A+ go effective. The usual NASDAQ or NYSE listing minimum will apply, however.

Because the maximum for Reg A+ offerings is $50 million of capital per company per year, this new route to an IPO applies best to small cap companies. Since the IPO window for these companies has largely been closed since the decimalization of stock trading in 2001, Reg A+ is opening the IPO window for them after a wait of 15 years.

In July NewsBeat Social announced their intent to list on Nasdaq, they are accepting investments live now. In my view NBS is a company well suited to Reg A+, with millions of Facebook fans that they can convert into investors and a business that is on the right side of news industry trends.

The Form 1-A Registration process with the SEC to gain Qualification for a Reg A+ is far simpler than for an S-1 Filing, and the average time to get Qualified is 70 days, cost for legal service providers to conduct the Form 1-A filing range from $50k to $150k.

Marketing costs will range from 2 to 6% of the capital raised from consumer investors on the funding platform in most cases. By establishing a low minimum, companies can conduct an early first closing in their Reg A+ offering and from that point onwards, fund the ongoing marketing costs from investment proceeds. Two year audited financials are required prior to starting the SEC filing. Audit costs will depend on the auditing firm (PCAOB required) and the complexity of the company.

Most Reg A+ IPOs will need to involve Broker Dealer Syndicates to add to the consumer investor demand that the marketing agency campaign will drive to the Reg A+ Offering on Manhattan Street Capital. A reasonable estimate for all-in costs is in the 10% range, including Broker Syndicate fees, Transfer agent and escrow fees where applicable and listing fees. (For the Manhattan Street Capital fees click here.)

* Tier 2 Reg A+ Offerings make sense from $4 Mill up to the max of $50 Mill/company/year. Very few Tier 1 offerings are being used at this stage because of theadditional cost and time involved in meeting state Blue Sky reporting requirements that apply for Tier 1.

See for more info and our free Reg A+ White Paper (at the bottom of the home page).

Rod Turner is the founder and CEO of Manhattan Street Capital, the #1 Growth Capital marketplace for mature startups and mid sized companies raising 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.


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