The Basics Of A Regulation A Offering

Regulation A (also known as Regulation A+, Reg A, or Reg A+) is a means by which a company can raise up to $75 Million per year from anyone in the general public nearly anywhere in the world - both from accredited investors and also the Average Joe and Average Jane regardless of wealth. The company can remain private after using Reg A, and everyday investors (or even customers or fans of a company) have a chance to invest in a company at an early stage, with the chance of “getting in at the ground floor” that used to only be for the rich and well-connected. 

Since 2015, Regulation A has dramatically improved the capital raising prospects for companies that wish to remain private, and are not ready for a formal IPO on NASDAQ or NYSE. It is also a new alternative to those who want to retain control of their company and who do not have access to accredited investors through a private placement or venture capital. Reg A has completely changed the landscape for start-up, early-stage and even later-stage companies who now can tap into hundreds of millions of potential smaller investors and give them actual ownership of shares in the company, along with angel investors and others who may also invest.  

Here are a few important facts about Regulation A:

  • Reg A stock is considered liquid under federal law. Investors can sell the shares to any willing buyer. While Reg A can be used to allow a company to list on a major exchange if a company desires, a company can also remain private and not have to deal with fluctuating stock prices or managing a public company.

  • Reg A is an excellent choice for companies that have a large customer base. If customers like your company and your products, they are likely to love the opportunity to own part of your company. 

There are two “tiers” of Reg A. Tier 1 allows a company to raise up to $20M every 12 months while Tier 2 allows a company to raise up to $75M every 12 months. 

Both tiers allow:

  • Anyone in the world can invest, not just accredited investors

  • The company raising capital can publicly advertise the stock offering

  • No limit on amount an accredited investor may invest

  • The company raising capital may “test the waters” prior to even filing for the stock offering with the SEC to determine is a market exists for the stock (and also to do lead generation at the same time). 

Tier 1 – Raise from $1 to $20,000,000 every year:

  • No requirement of audited financial statements

  • Must follow “Blue Sky” laws in each state where the stock offering is made

  • No limit on amount a non-accredited investor may invest 

Tier 2 – Raise from $1 to $75,000,000 every year:

  • Company must file up to two years of audited financial statements

  • Not required to follow “Blue Sky” laws in any state

  • Non-accredited investors are limited to 10% of their income or net worth per year 

Successful examples of Kendall’s clients using RegULATION A 

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BrewDog USA Inc.

Despite not having brewed or sold a drop of beer in the United States, international craft brewery BrewDog’s U.S. subsidiary raised more than $10,000,000 from over 15,000 investors as an early adopter of Reg A offerings, including one of the first ever done when the law went into effect.  The parent company, BrewDog plc – along with all of its subsidiaries, has now raised more than $250,000,000 from more than 200,000 investors worldwide using Reg A and similar laws in other countries, making them one of the most successful equity crowdfunding companies in the world, and making them a unicorn having an enterprise valuation of more than $1,000,000,000.  

Armed Forces Brewing Company

Armed Forces Brewing Company is a military tribute brewery owned by Military Veterans and others including famed Navy SEAL Team 6 operator Robert J. O’Neill, the man who killed Osama Bin Laden. What started as a small local brewery has grown by raising $7.5M in its first sold out Reg A offering that allowed the company to acquire its own headquarters, brewery and taproom and to have thousands of investors/brand ambassadors and distribution of its products into several states. Check out their second Reg A offering here.

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Golden Seed Inc.

The first U.S. based cannabis cultivator to ever be qualified by the SEC to sell stock to the general public – despite cannabis still being illegal at the federal level. In their first two Reg A offerings, California-based Goldenseed attracted thousands of investors from all over the U.S. building an army of online evangelists and customers for their products, and making Goldenseed a recognized brand in the multibillion dollar cannabis industry.