Regulation A, also known as Reg A+ provides companies with exemption from registration requirements and it applies to public offering of securities that do not exceed $20 million or $50 million in a one year period. Beside lowering regulatory hurdles and lowering costs Reg A+ has one more important benefit. Regulation A allows the issuer to conduct continuous offering. This means that issuer of securities is allowed to keep some stock for future sale without the need to set a share price at the time of qualification.
After the offering is approved by the SEC, companies have the right the offer stock at various prices over a period of time with the new Reg A+. In a Reg A offering the offering statement is qualified by the SEC and the offering is made by the offering circular.
At the time of the sale pricing information is filed after sale as a supplement which does not require the SEC review. First you need to understand the difference between amending and supplementing Reg A offering. Amending occurs when when there is a major change and filing the amendment requires the SEC to review the offering again. Supplementing occurs when no major change is made and SEC does not have a reason to review the offering.
Offering statement needs to specify the range of price. When the SEC approves the offering, you’ll submit only a supplement stating the final pricing when you sell the stock. However, you cannot leave out the number of securities (the volume of equity securities or aggregate primary number of debt securities) to be offered.
The company requires being up-to-date in its semiannual and annual report filling during the sale time to have a continuous offering. Many companies will utilize continuous offerings for shareholders sales and stock that is intended to be sold within the next two years after the offering is qualified.
In a traditional continuous offering on Form S-1 securities are offered at a fixed price and they will be offered at the same price in the future. To enable a company to change price an issuer must file an amendment to its registration statement and wait for the SEC to approve it. Under Reg A issuer can make continuous offering that commences within two calendar days after the qualification date, will be made on a continuous basis, may continue for a period in excess of 30 calendar days from the initial qualification date and at the time of qualification are reasonably expected to be completed within two years of the initial qualification date. Reg A allows issuers more flexibility in the pricing of securities in an offering. You can add-on the offering circular to change the price range of, or show a drop in the volume of, the securities offered in reliance on an approved offering statement within Regulation A, inasmuch as the decline in the volume of securities offered or change in the value range would not significantly change the declaration contained in the offering statement at official requirement. Any decline in the securities volume offered and a fluctuation in price range, for instance, price drop from low or high may bounce back or be noticed by the commission in the offering circular supplement that has been filed if, on the average, the volume drop or price change represent not more than a 20% difference from the change from the highest average offering price measured using the information in the approved offering statement.
For Continuous Offering Reg A provides key benefits, permitting delayed offerings for sales of securities after the offering is qualified without further SEC review.
