Neal Newman assesses the success of Regulation A in a paper titled, “Regulation A+: New and Improved after the JOBS Act or a Failed Revival?” The author reviews the 267 Regulation A filings made between August 13, 2012 and May 24, 2016 and samples a subset of 48 filings from this period. Of the sample, 19 were Tier 1 filings (39.6 percent) and 29 were Tier 2 filings (60.4 percent). For the Tier 1 filings in the sample set, the average minimum offering amount was $829,861 and the average maximum amount was $17,677,397. Average total assets over the sample were $6,215,061. Based on the Tier 1 offerings in the sample, the author concludes that very few of the filers sought to raise the maximum $20 million permitted under Tier 1 and few of the Tier 1 issuers were of a size to need $20 million in capital. It took, on average, 375 days to get qualified. By contrast, for the Tier 2 offerings in the sample set, the average maximum was just over $23 million. On average, these Tier 2 offerings took 120 days to be qualified. Based on the author’s assessment, he notes that the only persuasive rationale for relying on Regulation A rather than on Regulation D would be the ability to sell securities to non-accredited investors. The author supplemented his quantitative analysis with interviews of issuers that undertook Regulation A offerings. Contrary to the author’s expectations, the companies that undertook Regulation A offerings were pleased with their financing approach despite the ongoing reporting requirements and the time (and expense) associated with the Regulation A offerings. The author concludes with a cautionary example, citing an early Regulation A issuer that since has failed to achieve profitability.
