HOW IS A REGULATION A OFFERING DIFFERENT FROM AN S-1?

Regulation A was invented decades ago under the idea that it would be a simplified, and therefore cheaper, faster and easier alternative for companies to raise capital. In the beginning, there were narrow circumstances in which this could be true, but in practical matters, Regulation A provided minimal if any benefits and was usually slower than using an S-1 for going public. Because it was so rarely used, other regulatory entities such as FINRA and state securities regulators often had little idea that it was valid. Eventually, SEC review of Regulation A filing came to be a process of a year or more.

All that changed with the passage of the JOBS Act in 2012. The JOBS Act revamped Regulation A into two tiers: Tier 1 and Tier 2. Tier 2 is known as Regulation A+.

Regulation A is limited to US and Canadian issuers who are not reporting companies. Tier 1 is only slightly better than the old Regulation A. The disclosure format is improved,  the amount that can be raised has been increased from $5 to $20 million, and there is, as before, no requirement of audited financial statements. Tier 1 Regulation A is likely to be little used.

The real action is with Regulation A+ and the short answer to the question above is, yes, Regulation A+ is better than Form S-1 for IPOs, if you meet the requirements:

-the issuer must be organized in the US or Canada and have its principal business operations in the US or Canada

-the issuer cannot be a company currently required to file reports with the SEC under Sections 13 or 15(d) (the main reporting systems for public companies)

-if the issuer filed a Regulation A+ offering before, it must be current on its reports

-has not been the subject of an SEC stop order for the past 5 years, and no promoters or control persons are “bad boys”

-It cannot be a blind pool or similar company that seeks to make an acquisition.

Be aware, however, that if there is any inkling that your company does not meet the above requirements, the SEC will bounce your Regulation A offering.