Regulation A+ Rules A Boon for Late Stage Emerging Growth Companies
Thursday, March 26, 2015
On March 25, 2015, the Securities and Exchange Commission (SEC) adopted final rules for Regulation A+, promulgated under the Jumpstart Our Business Startups Act (JOBS Act). As a result, late stage Emerging Growth Companies (EGCs) should benefit from a modest reduction in transaction and reporting costs when compared to a full blown IPO.
What impact will this have on small capital formation? Not much. An EGC is any issuer with total annual gross revenues of less than $1 billion during its most recently completed fiscal year. While EGCs at the high end of the revenue producing spectrum stand to benefit, the adoption of Regulation A+ will likely have no impact on small and medium size entities.
The SEC’s proposed rules say as much. They estimate that very few new issuers will gain access to the public capital markets because of Regulation A+. Most Regulation A+ offerings will be siphoned from other segments of the current public capital market.