Going Public thru Reg A+

International Monetary offers the best methods available for GOING PUBLIC with CAPITAL FORMATION in the US capital markets. Over the last several years, there has been many changes in the ways that companies may raise capital including the creation of equity crowdfunding under the new Regulation Crowdfunding and Title III of the JOBS Act. Here, our group will discuss the differences between the traditional initial public offering (IPO) and the newly enacted Reg A+ offering that has been modified significantly by the SEC to encourage capital formation for emerging growth companies (EGC’s) by greatly reducing the costs, paperwork, and time that are always in the forefront of the “going public” process.

These significant differences include:

The creation of Rule 506(c), which came into effect on September 23, 2013 and allows for general solicitation and advertising in private offerings where the purchasers are limited to institutional and accredited investors;

The overhaul of Regulation A creating two tiers of offerings, which came into effect on June 19, 2015 and allows for both pre-filing and post-filing marketing and communications with qualified institutional buyers and institutions that are accredited investors for an offering by EGC’s, called “testing the waters”. All “testing of the waters” solicitation materials must be submitted to the SEC as an Exhibit under Part III of Form 1-A and all materials are subject to the anti-fraud provisions of federal securities laws;

Title III crowdfunding, which came into effect May 19, 2016, allows Tier 2 Regulation A+ companies to use Internet-based marketing and sales of securities offerings to retail and non-accredited investors (Tier 2 preempts state blue sky laws and allows for offerings of up to $50 million in any 12-month period);

Issuers may file financial reports with the SEC semi-annually instead of quarterly;

After a company’s offering is completed and becomes publicly traded, an investor awareness (IR/PR) program will be required to market the company’s security for a minimum of 1 year. This publicity program will be incorporated for growing the company’s shareholder base, enhancing the liquidity of its public security, and for maintaining a public market valuation that’s in accordance to other similar public companies in its industry – International Monetary’s investor relations programs are fully integrated with the going public/capital formation process so that the IR/PR publicity program is greatly maximized, but expenses are significantly minimized.

Test-the-waters communications involve solicitations of indications of interest (IOI’s) for an offering prior to the effectiveness of a registration statement. Where Regulation A freely allows and even encourages test-the-waters communications, the standard IPO process using a Form S-1 still strictly limits pre-effectiveness solicitations of interest and offering communications overall. With Regulation A, indications of interest as a result of test-the-waters communications are non-binding. Section 5(a) of the Securities Act prohibits the sale of securities before the registration statement is deemed effective.

Section 105(a) of the JOBS Act amended Section 2(a)(3) of the Securities Act to eliminate restrictions on publishing analyst research and communications while IPOs are under way. Under prior law, research reports by analysts, especially those participating in an underwriting of securities of the subject company, could be deemed to be “offers” of those securities under the Securities Act and, as result, could not be issued prior to completion of an offering. Section 2(a)(3) of the Securities Act as amended by Section 105(a) of the JOBS Act provides that publication or distribution by a broker or dealer of a research report about an EGC that is the subject of a proposed public offering of its securities does not constitute an offer of securities, even if the broker or dealer that publishes the research is participating or will participate as an underwriter in the offering. Moreover, the term “research” is defined broadly as any information, opinion or recommendation about a company and includes oral as well as written and electronic communications. This research need not be accompanied by a full prospectus and need not provide information “reasonably sufficient upon which to base an investment decision.” The research need not even be consistent with the prospectus, if there is one. In other words, research providers are free to say just about anything they wish about an IPO candidate, limited only by the general anti-fraud rules.

Section 105(b) of the JOBS Act eliminates existing restrictions on publishing research following an IPO or around the time the IPO lockup period expires or is released. Currently, under SEC and Financial Industry Regulatory Authority (“FINRA”) rules, underwriters of an IPO cannot publish research for 25 days after the offering (40 days if they served as a manager or co-manager), and managers or co-managers cannot publish research within 15 days prior to or after the release or expiration of the IPO lockup agreements (so-called “booster shot” reports). The Act requires FINRA and the SEC to eliminate these restrictions with respect to EGCs. As a result, any research analyst will be able to publish at any time after an EGC IPO, including immediately after the offering. On October 11, 2012, FINRA amended its rules to conform with the requirements under Section 105(b) of the JOBS Act. In particular, it amended NASD Rule 2711 to eliminate all quiet periods.

NOTE: International Monetary has numerous nationally highly qualified securities attorneys and PCAOB auditors who will provide all required correspondence with the SEC and FINRA for all companies’ necessary registrations and filings.