Regulation A+ Tier 2 Fundraising Limit Increases to $75 Million

Mar 15, 2021 | Blog
Partner

For companies looking to raise meaningful capital using a Reg A+ exemption, March 15th marks a significant increase in the Reg A+ Tier 2 offering limit. Businesses using this framework will now be able to raise up to $75 million in capital within a 12-month period, as opposed to the previous limit of $50 million.

The raising of this threshold comes as part of a larger class of amendments issued by the SEC, collectively titled “Facilitating Capital Formation and Expanding Investment Opportunities by Improving Access to Capital in Private Markets.” The amendments, which were approved back in January, are in full effect as of March 15, 2021.

Under the Securities Act, the SEC is required to review the Tier 2 offering limit every two years and is authorized to increase this limit as it deems necessary. In the amendments, the SEC offers some of its reasoning behind its decision to raise the limit, hoping that this adjustment will achieve the following outcomes:

  • encourage development of the smaller IPO market
  • encourage more issuers to conduct securities offerings
  • provide more investment opportunities for investors
  • improve the economics for issuers and broker dealers to participate in the Regulation A market
  • attract a larger and potentially more seasoned pool of issuers and investors

The increase in the initial offering limit also affects the maximum amount of secondary sales allowed under Tier 2. While securities under Reg A+ are freely tradeable, during the 12-month period after the offering, secondary sales by all security holders are limited to 30% of the aggregate offering price. Therefore, the change in the Reg A+ capital limit also boosts the limit in secondary sales from $15 million (30% of $50 M) to $22.5 million (30% of $75 M).

If you have any questions regarding Reg A+ offerings or the changes effective as of March 15, please contact Justine Clark.

Also check out our previous article, What is Regulation A+ and How Can It Help My Business?