3 Ways for MicroCaps to Use Reg A+

A recent post on the OTC Market’s new blog titled “The Road Not (Yet) Taken” highlights 3 Ways for Microcaps to Use Reg A+. While there has been a lot of excitement about RegA+ in the last few months, many microcap professionals are still trying to determine what is Reg A means for them.

Currently Reg A+ and the following possibilities are only available to private and non-SEC reporting public companies. While not currently available to SEC reporting companies, the OTC Markets has filed a petitionto have Reg A+ expanded to allow SEC reporting companies to befit.

Reg A Reverse Merger Alternative

If you are a microcap professional, you probably have first hand experience with reverse mergers or companies that went public via reverse merger. While the reverse merger has long been considered a fast and cost effective method of going public, there are also a number of pitfalls associated with reverse mergers. Going public via an S-1 registration/IPO has long been the only “clean” reverse merger alternative for microcaps looking to go public.

Most microcap professionals have probably heard of Reg A+ as an IPO option. Reg A+ is designed to be a shorter and easier “registration”. So, as the most common anticipated use for Reg A, “mini IPOs” will probably have the greatest impact on the microcap space (potentially decreasing the value of “shells” and increasing the quality of microcap companies).

Reg A as an M&A Registration

Microcap professionals are probably less familiar with Reg A for M&A but according to the OTC’s blog; “a number of issuers have taken advantage of the new amendments to offer shares in a merger and acquisition”.

When acquiring a company in a stock transaction Reg A is an effective way to offer free trading stock to target company shareholders (many of whom may be unaccredited). This could be a great option for microcap issuers who would normally need to offer restricted stock to the sellers of an acquisition target or rely on a traditional registration or other exemptions.

Reg A Shelf Offering

Reg A also allows issuers, who are current in their reporting obligations, to offer their shares on a delayed or continued basis, in similar fashion to a shelf registration. Shares would need to be offered at a fixed price and currently cant be offered at the market.

The OTC Market’s petition is currently asking the SEC to expand Reg A to allow for at the market offerings.

Check out the OTC Market’s blog HERE.

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