A Defining Moment for the Crowdfunding Industry as Offer Mirrors Small Cap IPOs of the Past
Chicken Soup for the Soul Entertainment (CSS Entertainment) is reporting that its Reg A+ crowdfunding offer has closed at the top end of its range having raised $30 million from small and large investors alike. Chicken Soup is scheduled to trade on the NASDAQ tomorrow (Friday, August 18, 2017) under ticker symbol “CSSE”. Crowdfund Insider reported yesterday the offer was fully subscribed the details were only made available today. The company reported a pre-money valuation of $120 million.
The initial offer targeted a minimum raise of $10.8 million at $12 per share. The Offering Circular allowed the company to sell an additional 1.6 million shares and demand allowed the company to fully subscribe the initial public offering (IPO). A total of 2,500,000 shares of Class A common stock were sold at $12 per share.
An individual involved with the crowdfunding offer stated;
“The big part of the story is that this is really a defining moment for the industry. This marks the end of Reg A+ being viewed as a Mini-IPO and the resurgence of the small cap IPO of yesteryear”.
Social Media Utilization Plays Key Role in Sale of CSS Entertainment Shares
William J. Rouhana, Jr., Chairman and CEO of CSS Entertainment, commented on the successful IPO;
“Investor demand for our IPO was extraordinary. Social media played a critical role in driving demand. While we anticipated that the combination of social media and our well-recognized brand would generate significant awareness, the number of prospective investors interested in our IPO exceeded even our expectations.”
The IPO was made pursuant to Reg A+ Tier II that was created by the JOBS Act of 2012, which is designed to facilitate access to capital for smaller companies. In its earlier iteration, old Reg A was lightly utilized due to onerous state blue sky rules that allowed every state to possibly block an issuer using the exemption. The new version, since referred to as Reg A+, exempted issuers from seeking individual state approval thus causing this resurgence in the small IPO market.
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In recent years, the IPO market has become moribund as successful companies have many options for growth capital minus the burdens of becoming a public company. Reg A+ may be the catalyst to address this economic shortcoming.
Scott W. Seaton, vice chairman and chief strategy officer of CSS Entertainment, added;
“Reg A+ allowed us to marry ‘the crowd’ with institutional and other traditional Wall Street investors. We believe this blend is one of the keys to a successful Reg A+ IPO.”
“Significant institutional participation”
Insurance companies, family offices, and other large investors participated alongside retail investors. This marriage of funding sources was described as blending the crowd with big money potentially giving both sides the opportunity to benefit from the company’s future growth.
This will be the fourth company to raise funding under Reg A+ and then quickly trade shares on a national exchange. Previous issuers that have leveraged Reg A+ in this manner include; Adomani, ShiftPixy and Myomo. CSSE will be the second company to trade on NASDAQ following a Reg A+ offer.
Well known Wall Street firms participated in the IPO. HCFP/Capital Markets LLC, The Benchmark Company LLC and Weild & Co. acted as joint book running managers for the offering. Greenberg Traurig served as underwriters’ counsel and Graubard Miller served as company counsel.
Rooney Partners LLC was the digital media and public relations agency of record. LHA Investor Relations is advisor to the company.
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