12 Dec Don’t Forget Regulation A+ in Registration Rights

Here’s a free one for my investor and venture capital friends. More and more serious players are lining up to get ready for IPOs under the new Regulation A+. We are about to see companies go public through Reg A+ directly onto national exchanges. Noted middle market underwriters already are in the space and readying deals. Several are venture-backed companies with multiple prior preferred stock rounds in place. So what’s the issue?

Registration rights. When private company investors buy equity, they typically require the company to “piggyback” and include their shares in any registered offering so that their shares can be sold publicly upon the IPO (though sometimes with some lockup restrictions). Sometimes they have “demand” rights to force the company to register their shares for resale. But Reg A+ offerings are not registered offerings, they operate through an exemption from registration. Thus typical registration rights do not apply in Regulation A+ IPOs.

So practice tip for venture and private company lawyers and dealmakers in the new Reg A+ world: when fashioning registration rights add that the rights equally apply to offering statements under Regulation A+. The only caveat: to limit the rights so that a company does not exceed the $50 million Reg A+ limit. Not sure how to do it? Give me a call!