Скачать или смотреть What is a "Stairstep" Regulation CF Offering Strategy?

What is a "Stairstep" Regulation CF Offering Strategy?
 
"Direct" Regulation CF Offerings have exploded in popularity over the last two years. The Securities and Exchange Commission's rule changes in March 2021 which increased the Regulation CF annual limit to $5,000,000 and created the ability for FINRA broker dealers to serve as intermediaries overhauled the CF program and created the ability to execute a "mini Reg A+" offering.

The ability to execute a Regulation CF offering using your own custom raise portal with minimal commissions and fees has changed the dynamic for companies raising funding. Regulation CF does require issuers to have audited financials for any offering over $1,235,000 in size. Are there ways to mitigate that expense?

Enter the "Stairstep" Regulation CF strategy. Quite simply - a "stair step" approach to executing under Regulation CF involves a first round at $1,235,000 (or less) which alleviates the need for the audited financials. This also allows the issuer to execute a first round and get some feedback on investor interest prior to launching a larger secondary. As the first round is executing, the issuer can then utilize proceeds from the offering to pay for the audit and once the audit is complete - the first round is closed, and we update the Regulation CF filing for a second round that goes above the $1,235,000 cap.

This strategy has the following advantages:

it allows the issuer to gauge market interest
it allows the company to execute and start raising initial funding without the need for the audited financials
the second round is typically re-priced at a higher valuation
funds from the first round can be used to pay for the audit
the time to update between rounds is minimal

 
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