Last month, the Nasdaq quietly submitted a proposal to the SEC regarding Regulation A+. It is simple enough to quote: “Any Company listing on Nasdaq in connection with an offering under Regulation A of the Securities Act of 1933 must, at the time of approval of its initial listing application, have a minimum operating history of two years.” On April 18 the SEC published the proposal soliciting comments on the proposed rule change.
Last week I gave a talk at The Reg A Conference entitled, “Where Has Reg A+ Gone Right?” There are a number of good things to list since deal making began in earnest in July 2016 following dismissal of a court challenge to the Reg A+ rules. Almost 125 deals, averaging $10 million per deal, have been completed. About a dozen community banks and tons of real estate investment trusts have successfully gone public using Reg A+. And ten issuers got listed on Nasdaq or the NYSE, though unfortunately their stocks have not fared well generally. The SEC also approved allowing full reporting issuers to use Reg A+, particularly helping smaller OTC companies with an easier path to raising money. Cannabis companies, which generally are not able to list on the big exchanges, also have begun to see the benefit of Reg A+ to raise money in the over-the-counter markets without dealing with state “blue sky” merit review of their IPO.
The NYSE recently decided to pause taking new Reg A+ issuers, and the Nasdaq lately had been slow walking them. This proposed requirement to be operating two years to get a Nasdaq listing makes sense. Some (but not all) of the 10 exchange listed IPOs were pretty new companies. This may partially explain their challenge in building market support for their stocks. Newer companies can list over the counter initially then move up. If this encourages more use of Reg A+ and Nasdaq’s support of these listings, then this can be a positive step in the Reg A+ story, which is only in the first inning.