Regulation A – Statistics
Posted by Attorney Laura Anthony on February 21, 2017
Regulation A – Statistics- Since the new Regulation A came into effect on June 19, 2015, its use has continued to steadily increase. According to The Vintage Group, through November 30, 2016, there were a total of 165 Regulation A+ filings, 16 of which were subsequently withdrawn. Of these, 130 have been qualified by the SEC, with the average time to receive qualification being 101 days. Some companies have filed multiple Regulation A+ offerings. The 130 qualified offerings represent 94 different companies. Thirty eight (38) of the 94 companies completed Tier 1 offerings and 56 completed Tier 2. The average offering size of Tier 1 offerings is $9.5 million and $28.9 million for Tier 2 offerings. As reported by The Vintage Group, the average cost of a Tier 1 offering has been $120,000 and of a Tier 2 offering has been $920,000. I am assuming this includes marketing costs.
According to a recent SEC white paper, companies mainly offered equity which accounted for 85% of all offerings. The majority of offerings have been on a best efforts self underwritten basis. The majority of all offerings have been on a continuous offering basis allowing a company to place the offering over time. Some companies (16%) have included sales by existing securityholders in their offerings with these mainly being Tier 2 offerings.
For those filing Tier 2 offerings the majority have engaged in nationwide solicitation and for those filing Tier 1 offerings the average number of states solicited in is 4. 39% of Tier 1 filers included audited financial statements even though the SEC does not require them, this could be because many states require audits for blue sky approval.
Most Regulation A filers are smaller companies with the average revenues being $2.8 million and many even pre-revenue. The most common businesses of filers have been Business services, real estate, non-depository credit institutions, holding and other investment offices and depository institutions. Most companies are incorporated in either Delaware and Nevada with businesses located in California as the most common followed by DC, Virginia and Texas.
Interestingly most offerings to date (80%) have not engaged in test the waters communications. This could be because of the low rates of conversion causing companies to opt for a “buy now” strategy instead. According to the SEC the average length of review from filing to qualification has been 78 days with Tier 2 offerings taking a little longer than Tier 1. Consistent with its purpose Regulation A has become an IPO on-ramp or an alternative to a small IPO allowing for a private to public transaction at a reduced cost and complexity.