Reg A+ and the Secondary Market

Reg A+ is an effective way for companies to raise additional capital - did you know it could also provide potential  liquidity to existing shareholders? 

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Benefits of Reg A+  

Raising capital through Reg A+ has many benefits for both the company and its investors. For the company, it allows them to raise additional capital without going through the time-consuming and expensive process of a traditional initial public offering. It also allows them to offer their shares to a broader pool of potential investors, including retail investors who may not have been able to participate in a traditional IPO or other forms of capital raising that are limited to accredited investors. 

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Additionally, many founders are surprised to learn that issued Reg A+ shares are tradeable for most retail investors who aren’t insiders or affiliated with the issuer. But what exactly does that mean?

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Reg A+ Liquidity

For Reg A+ investors, whether shares can be sold will depend on several factors:

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1. Is the issuing company listed on an exchange?  If so investors will have access to a market for the secondary sale of shares.  
2. If a company is not listed on an exchange, liquidity may be limited. A  series of securities and state rules determine when and how these securities may be traded.  Investors should speak to their licensed broker-dealer or counsel about their ability to sell Reg A+ shares.
3. Is the investor a company affiliate? Affiliates who want to sell their Reg A+ securities may only do so in compliance with  Rule 144 .  This includes limits on the amount of shares that can be sold at any one time and requires a series of filings about the company and the broker-dealer handling the sale.  Affiliates will need the assistance of a license broker-dealer to assist with the sale process.
4. How many shares have been sold in the secondary market?  Secondary sales at the time of Regulation A+ offering and in the 12 months following may not exceed  30% of the aggregate offering price .

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Conclusion

Reg A+  regulatory framework, allows companies to tap into a wider pool of potential investors and generate more interest in their business, while at the same time, offering investors the potential for earlier liquidity. Investors interested in potentially selling their shares on the secondary market should contact their broker-dealer about restrictions which may or may not apply.

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