When listing on NASDAQ or NYSE, companies have the option to perform a Reg A+ IPO IPO as an alternative to the traditional underwriter method. There are two tiers of Reg A+. The first allows companies to offer a maximum of $20 million annually, and requires an SEC filed offering circular. The second allows companies to offer a maximum of $50 million annually, also requires the provision of an SEC filed offering circular, but allows companies to preempt blue sky laws. Most Reg A+ offerings are Tier 2.
Both tiers require some EDGAR filing. A Tier 2 offering, unlike a Tier 1, must provide annual 1-K and semiannual 1-SA reports, as well as 1-U reports in the cases of major company changes.
Only Tier 2 offerings may list on national exchanges. They must follow the form S-1 format on their offering statement, and file a form 8-A.
Getting ready for Reg A+
As with any IPO, your company should be prepared before you begin your offering. Such preparation includes legal consultation and, ideally, marketing planning. A Reg A+ IPO may use many solicitation avenues closed to other IPOs, like email and social media. Most experts recommend a broad marketing strategy, not dissimilar from those used in equity crowdfunding campaigns. It is useful to market your intention to trade on national exchanges. It gives investors an idea of the liquidity they can expect from your shares.
You will also need to establish a relationship with a US-GAAP auditor, if you do not already have one. SEC filing cannot begin until a two-year audit is completed. Also, audit opinions are required for Tier 2 SEC filings.
Additionally, you will want to get in contact with your desired exchange. It is useful to have direct communication when determining whether your company will meet exchange listing requirements.
When the two-year audit is complete, a 1-A SEC filing can begin. Contract with a transfer agent to do this. Next, it is time to start gathering marketing materials and building a presence. This can be completed during the SEC filing process, which takes, at minimum two months to finish (60+ days). Because this is a Tier 2 Reg A+ IPO, you will not be subject to blue sky review.
As the offering date draws nearer, you will want to prepare your shares. If you have not done so already, you will want to begin gathering and executing contracts. You should find a capable Escrow Agent and a Market Maker. You will also need an underwriter. Reg A+ IPOs do not require the use of an underwriter, but NASDAQ and NYSE do.
Testing The Waters
Some time before your IPO, you should “test the waters” of your market. This involves gauging investor interest in your company by contacting institutional accredited investors and qualified institutional buyers. After 2012, most companies have been allowed to do this. They must only meet the SEC definition of an emerging growth company (EGC). If you do test the waters, The SEC may request that you wait until they have completely reviewed your registration statement.
The IPO, and What To Do Next
Once you have accumulated contracts and priced your shares, you are ready to accept capital. The end is in sight. As long as your SEC 1-A filing is accepted, you will be close to your first collections.
The SEC determines your qualified minimum during the review process. For your Escrow Agent to release funds to you, capital raised by your IPO must exceed this minimum. Luckily, the SEC regularly qualifies offerings with a zero minimum. This renders all capital immediately collectible. Many companies will keep their offers open until they max out, but some elect to close the doors early. The choice is yours.
Once the initial offering is complete, your shares will begin to trade. Listing on NYSE or NASDAQ will provide ample liquidity for these shares. Next, file a form 8-A with the SEC. Once you have, you will be allowed to list. So long as you have been in contact with your desired exchange and ensured that you will meet its requirements, this step should be simple.
