During the ACSEC meeting this morning, the SEC provided some interesting numbers regarding Reg A+. Title IV of the JOBS Act, now commonly referred to as Reg A+, has been actionable for over a year so it was interesting to get an update from the Commission. Prior to the JOBS Act, Reg A existed but no one utilized the exemption as it was overly encumbered by excessive rules. Since the SEC announced the update, Reg A+ has become a viable path for both established firms and startups to raise capital online.
According to their numbers, total filings are around 108 for a total ask of about $2 billion. Regarding filings that have been approved by the SEC, there have been 48 so far for a total of around $840 million. The number of filings are almost evenly split between Tier 1 and Tier 2 – many of the filings are for real estate deals.
Asked how much has actually been raised under Reg A+, Sebastien Gomez from the SEC stated about $99 million. He added a caveat to this number as it represents only a very small sliver of the filings and many of the sales under the exemption are still ongoing.
The discussion between SEC staff and ASCEC members was followed by a very good presentation by Paul Elio who offered up his firm, Elio Motors, as a sort of case study. Elio raised around $17 million on StartEngine from both accredited and non-accredited investors. The offer, once closed, was soon followed by a listing on the OTCQX providing liquidity for any shareholder. Elio described the new exemption as transformational for his company. Traditional sources of capital like VCs or Private Equity – were simply not interested.
“Reg A+ put us over the hump,” said Elio.
The fact that public markets have become more of an exit opportunity for VCs to cash in their gains, as opposed to a method to raise growth capital, was not lost on ACSEC members.
“The point of the equity markets has gotten lost,” said one participant. Perhaps Reg A+ is the “right sized” exemption to bring capital markets back to where they need to be. Accessible to smaller companies with opportunity for smaller investors to generate capital gains.