If you’re an investor, you may or may not have heard about new SEC regulation known as Regulation A+. However, it is likely a regulation that will drastically change the game for those looking to get involved in smaller companies that offer tremendous growth opportunities. Today, we’ll talk about what Regulation A+ is, a few examples of how it’s already being used, and how this new regulation really could changed the game.
What Is Regulation A+
As mentioned above, Regulation A+ is a relatively new regulation. The regulation surrounds how companies can issue public offerings. For example, in the past, if a smaller company wanted to issue shares and raise say $10 million in doing so, it would be nearly impossible. Old regulations required these companies to go through banks, most of which wouldn’t want to touch such a small offering. If they did decide to take the offering on, their fees would weigh down the actual funds raised in such a way that it may not be worth it for the company to do it anymore.
However, today, we have Regulation A+. This regulation is part of Title IV of the JOBS Act and it allows companies to raise their own money from the public. In fact, companies can now raise up to $50 million from the public without having to go to a bank to do it.
The Regulation A+ offerings work just like your standard IPO. They allow the companies to offer shares to the general public, without requiring them to go through accredited investors. While these companies do need to file with the SEC and get approval before taking advantage of this regulation, it is now possible, and relatively easy. Even the fees paid to the SEC for a Regulation A+ offering are far lower than the fees on a traditional IPO and disclosure requirements are much easier to deal with. At the end of the day, what Regulation A+ does is make it easier for companies to raise relatively small amounts of money from the investing public.
How This Gave Way To Different Types Of Offerings
There are multiple ways that this is being used. While it is an opportunity for smaller companies to appeal to the investing public, many already publicly traded companies are also using these types of small offerings to create customer loyalty programs. For example, there are two recent publicly traded companies that I can think of that are using regulations like Regulation A+ to their advantage…
- Domino’s Pizza – Chances are that you’ve seen tons of commercials about this recently. Domino’s Pizza recently launched a program where they are giving shares of their company to loyal customers.
- MTBC – MTBC recently gave shares to 50 customers through various similar regulations to show how much they are valued, saying the following in a statement…
“We greatly value our clients and their support of our corporate endeavors to facilitate affordable, quality healthcare… We are the first healthcare IT company to offer a loyalty program of this nature, and the positive feedback we have received thus far validates client confidence in our model, services and company.”
How This May Shape The Way We Find Opportunities Ahead
There is a specific type of investor that loves investing in small companies. That’s because when these companies hit it big, they’re likely to generate massive profits. The new regulation makes it possible for investors to take part in more of these opportunities. While finding them may be a bit more difficult while the regulation and resulting actions continue to evolve, this really could change the game for many in the long run!
What Do You Think?
How do you think Regulation A+ will change the game? Join the discussion in the comments below.