Regulation A+: Mini-IPO for Smaller Companies Raising Up to $75 Million

Key Takeaways

• Regulation A+ lets US and Canadian companies raise up to $75 million per year from accredited and non-accredited retail investors without a full S-1 registration, using a Form 1-A offering statement.
• Tier 2 non-accredited retail investors face a purchase cap of 10% of annual income or 10% of net worth per offering, protecting smaller investors from overconcentration.
• Reg A+ practice has concentrated in real-estate sponsors, consumer brands, and crypto-adjacent issuers, with most completed raises under $25 million despite the $75 million cap.
• Running a Reg A+ and a concurrent Reg D offering simultaneously can inadvertently break both exemptions through integration rules, a frequently missed compliance trap.

What It Is

Regulation A+ (often called a mini-IPO) is the SEC's scaled offering exemption under Sections 3(b)(1) and 3(b)(2) of the Securities Act, implemented in Rules 251 through 263 (17 CFR 230.251 et seq.). It was expanded by the JOBS Act in 2015 and updated again in 2021. Issuers file an offering statement on Form 1-A, which is SEC-reviewed and must be qualified before securities are sold.

Two tiers are available. Tier 1 permits offerings up to $20 million in any 12-month period with state blue-sky review but lighter ongoing federal reporting. Tier 2 permits offerings up to $75 million in any 12-month period (raised from $50 million in March 2021), preempts state blue-sky registration, but requires audited financial statements and ongoing Form 1-K, 1-SA, and 1-U filings.

The Intuition

A private company needing capital has three main doors. Rule 506(b) and 506(c) under Regulation D are cheap but only reach accredited investors. A traditional S-1 IPO reaches everyone but is slow, expensive, and demanding. Reg A+ is the middle door. It opens the offering to both accredited and non-accredited retail investors, permits public solicitation, and lets the company list the resulting shares on an exchange if it meets listing standards.

The cost is real. Tier 2 issuers must produce audited GAAP financials, ongoing annual and semiannual reports, and follow current-report triggers similar to Form 8-K. Legal and accounting fees are meaningful even if they undercut a full IPO. SEC staff data show Reg A+ activity has concentrated in real-estate sponsors, consumer brands, and crypto-adjacent issuers, with total Tier 2 issuance running in the low single-digit billions annually.

How It Works

Five features define the framework.

1. Eligibility. Reg A+ is available to US and Canadian issuers that are not already SEC-reporting companies, not blank-check companies, not investment companies, and have not been subject to SEC disqualifying events. Shell companies other than qualified business combination shells are excluded.

2. Form 1-A filing and qualification. The issuer files Form 1-A with three parts: a notification cover sheet, an offering circular (roughly the Reg A+ analog of a prospectus), and financial statement exhibits. The SEC reviews the filing and issues comment letters. The offering becomes qualified when the SEC declares it effective.

3. Investor limits. Tier 2 imposes per-investor purchase limits on non-accredited natural persons: the greater of 10 percent of annual income or 10 percent of net worth. Accredited investors face no cap. Tier 1 relies on state law for investor protection because it lacks federal preemption.

4. Testing the waters. Both tiers permit testing-the-waters communications before and after filing Form 1-A, a flexibility borrowed from WKSI rules. This lets issuers gauge demand through online channels before committing to the full filing expense.

5. Ongoing reporting. Tier 2 issuers file annual Form 1-K, semiannual Form 1-SA, and event-driven Form 1-U. They can also voluntarily register the securities under Section 12(g) to list on NYSE American, Nasdaq, or OTCQX, subject to the exchange's own listing standards.

Worked Example

A consumer fitness-equipment brand with $40 million in revenue wants to raise capital and build a retail shareholder base. A full S-1 IPO is out of reach on cost and timeline. The company files Form 1-A under Tier 2 to raise up to $50 million in common stock at $8 per share.

Before filing, it runs a testing-the-waters landing page and gathers 35,000 non-binding indications of interest. Form 1-A is filed in March with audited financials. The SEC issues two comment rounds, and the offering is qualified in July. The company launches with an online broker as sales agent. Non-accredited retail orders are capped at 10 percent of income or net worth; accredited orders are uncapped. Over nine months the company sells 5.5 million shares for $44 million gross, pays about 7 percent in platform and agent fees, and lists on OTCQX. Ongoing 1-K annual reports begin the following spring. SEC releases on Reg A statistics show Tier 2 proceeds concentrated in deals under $25 million, with a smaller number of $50 million to $75 million raises since the 2021 cap increase.

Common Mistakes

1. Mixing Reg A+ with Reg D. Issuers sometimes try to run a Reg A+ and a concurrent Reg D raise. Reg 251(c) restrictions on integration and quiet-period overlap are detailed. A sloppy concurrent offering can blow both exemptions.

2. Ignoring the 12-month aggregation. The $20 million and $75 million caps are rolling 12-month aggregates, not annual calendar limits. A follow-on Reg A+ must subtract prior-twelve-month proceeds from the cap.

3. Underestimating ongoing reporting cost. Tier 2 reports are lighter than 10-K and 10-Q but still require auditor involvement. Companies that stop filing lose their exemption for future Reg A+ tranches and face SEC enforcement risk.

4. Assuming retail demand equals institutional endorsement. Reg A+ deals historically price on retail enthusiasm rather than institutional book-building. Aftermarket support is often thin, and initial-day pops from retail channels can reverse quickly without sell-side coverage.

5. Confusing Tier 1 state review with Tier 2 federal preemption. Tier 1 still requires coordinated state filings via the NASAA coordinated review program. Tier 2 preempts state registration but not state anti-fraud authority.

Frequently Asked Questions

Q: What is Regulation A+ in simple terms? Regulation A+ is a set of SEC rules that let smaller companies sell stock to the general public, including retail investors who are not accredited, without a full IPO registration. Companies file a Form 1-A offering statement, the SEC reviews it, and once qualified the company can raise up to $75 million per year from a broad investor base.

Q: How does Regulation A+ affect investment decisions? Unlike Reg D private placements, Reg A+ investments can be sold to retail investors who may have limited resources. Non-accredited investors are capped at 10% of their income or net worth per offering, but aftermarket liquidity is often thin since most Reg A+ stocks trade on OTCQX or smaller platforms without institutional coverage.

Q: What is a real-world example of a Regulation A+ offering? A consumer fitness brand with $40 million in revenue filed Form 1-A for a $50 million Tier 2 raise at $8 per share. After two SEC comment rounds and a testing-the-waters campaign that gathered 35,000 non-binding indications, the offering closed with $44 million raised over nine months and the shares listed on OTCQX.

Q: How can investors use knowledge of Regulation A+ offerings? The rolling 12-month cap means a Reg A+ issuer that has already raised $60 million in the current period has only $15 million of remaining capacity. Checking prior Form 1-K filings to calculate how much of the $75 million annual cap has been used tells you whether the issuer has financing runway or needs to wait for the calendar to reset.

Q: How is Regulation A+ different from Rule 506(b) under Regulation D? Rule 506(b) is a private placement exempt from SEC registration that bars general solicitation and generally limits buyers to accredited investors. Regulation A+ is a scaled registered offering reviewed by the SEC that allows public advertising and non-accredited investors, but requires an SEC-qualified offering circular and ongoing annual and semiannual reports.

Sources

1. SEC. "Regulation A - Small Business Resource Page." https://www.sec.gov/resources-small-businesses/exempt-offerings/regulation
2. Investor.gov. "Regulation A - Updated Investor Bulletin." https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins/updated-1
3. Bass Berry & Sims. "SEC Raises Threshold for Reg A+ Offerings to $75 Million." https://www.bassberrysecuritieslawexchange.com/patchwork-exempt-offering-framework-reg-a/
4. SEC. "Regulation A: Guidance for Issuers." https://www.sec.gov/resources-small-businesses/regulation-guidance-issuers

Disclaimer

This article is educational content only and is not financial advice. Nothing here is a recommendation to buy, sell, or hold any security. Consult a licensed advisor before making investment decisions.