Today was an important day for small and emerging companies. On this day the US Court of Appeals for the DC Circuit dismissed the challenge by NASAA and others to set aside the SEC’s rulemaking under Title IV of the Jumpstart Our Business Startups Act (the JOBS Act).
Regulation A, as modified by Title IV of the JOBS Act, was a critical step by both Congress and the SEC in making the public markets available to small and emerging businesses – at an affordable cost and without the burden and uncertainty of a state by state review of the offering.
No longer does a company have to spend millions of dollars for its IPO. Nor does a company face the prospect of having its offering banned in states who view the offering as too risky. Such was the fate of Apple Computer’s IPO back in 1980, both in Massachusetts and elsewhere. In the view of the state regulators, Apple’s stock was overvalued. State regulators are still blushing today over that now infamous call.
Regulation A+ (as it is informally known as) provides a useful, cost-effective path for companies to both become public, and remain public, with a simple offering qualification process at the SEC and much lighter ongoing reporting costs, when compared to fully reporting companies.
And after one year in operation, Regulation A+ has fulfilled expectations. The SEC qualification process has worked well in operation, with offerings clearing the review process in less than 60 days, and with a lighter touch review from the SEC than is typical in a full Form S-1 registration. My own personal experience with these new filings bears this out – an initial comment letter from the SEC barely over two pages – something unheard of in a full SEC registration.
So Regulation A+ is an important and valuable option for small and emerging companies to consider if they are looking to provide liquidity for their shareholders and the heightened profile that goes with being a publicly reporting, and trading, company.
For any of you who would like to learn more about Regulation A+, and other new capital raising options now available since the passage of the JOBS Act, feel free to contact me directly via email at sguzik@guziklaw.com.
