02 Nov BIG FLASH: Reg A+ Limit Raised to $75 Million

In a very big pre-Election Day surprise, the Securities and Exchange Commission today took a few significant steps to enhance access to capital for smaller companies, with the stated intention to “harmonize, simplify, and improve the multilayer and overly complex exempt offering framework.” The new changes, approved on a party line 3-2 vote include, most significantly, increasing the amount that companies can raise using the streamlined and simplified public offering process under Regulation A+ from $50 million to $75 million. They also raised the amount that can be raised under Regulation Crowdfunding to $5 million, and under Regulation D Rule 504 to $10 million.

Why now and what does this mean? Presumably the Republican-controlled SEC feared a Trump loss tomorrow and sought to complete some meaningful pro-capital formation changes in advance of a lame duck period. What it means is that companies now will have the ability to (a) stay private longer, (b) go public in a simpler way but raise more money and (c) even if already public, conduct a Reg A+ public offering without the extra hassles and restrictions of the traditional process.

What are the practical implications? There are easily a dozen situations over the last few years where companies I spoke with that were going public eschewed Regulation A+ because they desired to raise closer to $75 million in their IPO than $50 million. In particular, many biotech companies go public raising in the $75 million range, and those may now see the benefits of unlimited testing the waters with all investors along with the faster, more cost-efficient process that Reg A+ offers. We will add more after we read the release!