Tepid Month for Reg CF Online Capital Formation

Regulation Crowdfunding (Reg CF) experienced a tepid month of online capital formation during May. In their monthly update, Crowdfund Capital Advisors (CCA) said that while the number of new deals increased by 22.7% compared to April, the capital committed decreased by 40.4%.

CCA notes that just 36 Reg CF deals closed during May with 511 active deals during the beginning of the month.

Seven offerings raised over $1 million in May – slightly lower than in recent months. New deals in May numbered  119 launched, up from 97 in April, down from the average new deals of 131 for the past 12 months.

Valuations moved higher – but this was skewed due to the fewer number of deals with median valuations rising to $13.1 million from $9.5 million.

In comparison to previous years, CCA notes that April typically sees a high volume of deals closing in comparison to May. The 36 issuers that closed in May raised $19.7 million, the least amount since November 2021.

Sherwood Neiss, Principal at Crowdfund Capital Advisors, said he is not surprised that May did not deliver similar results as April due to economic uncertainty, including the possibility of a recession and other uncertainties like the recently resolved debt ceiling brinkmanship.

“The fact that the average check is 35% greater than the prior 12-month period provides solace that investors are still willing to deploy capital into investment crowdfunding offers,” said Neiss.

Jason Best, the other Principle at CCA, said the industry must now compete with other options such as money market accounts that are offering higher interest rates while providing more security.

“This may put downward pressure on industry volume.”

Best expects the summer months to be slower as well.


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