Regulation A+ Offering

A Regulation A+ offering is a type of exempt offering that allows a company (or a Fund) to raise up to $75 million from the general public—including retail investors—while filing a simpler disclosure document with the Securities and Exchange Commission than a full initial public offering requires. Created by the JOBS Act in 2015, it is sometimes called a “mini-IPO” because it democratizes access to public capital markets for smaller issuers that cannot yet manage the cost and complexity of a traditional IPO.

The JOBS Act opened the door to smaller issuers

Before 2015, the path to public capital markets was narrow. A company either raised money privately from accredited investors (via Regulation D), or it went through the ordeal of a traditional IPO—hiring major underwriters, preparing a full registration statement, enduring SEC review, and bearing costs often exceeding $10 million. For a startup or small manufacturer, this was prohibitive. The Jumpstart Our Business Startups (JOBS) Act of 2012 introduced Regulation A, and the SEC refined and expanded it to Regulation A+ in 2015, creating a middle path. A Regulation A+ offering lets a company raise substantial capital—up to $75 million per year—from the public at a fraction of the IPO cost.

The legislative intent was clear: democratize access to capital markets. Before Regulation A+, a brilliant biotech firm with $40 million in annual revenue had few options for raising $30 million that did not involve a traditional IPO or a dilutive private round. Regulation A+ gave it a third way.

Two tiers with different rule sets

Regulation A+ operates in two tiers, each with its own limits and disclosure requirements. A Tier 1 offering allows raises of up to $20 million in a 12-month period and has the lightest disclosure burden. Tier 1 issuers file a Form 1-A and are exempt from full GAAP financial statement preparation; they can submit simpler financial data. Tier 2 issuers, raising between $20 million and $75 million, must file audited balance sheets and two years of audited income statements, and they are subject to ongoing reporting requirements after the offering closes.

Most companies aiming to raise substantial sums go for Tier 2. The extra auditing cost is meaningful but still a fraction of a traditional IPO’s burden. Tier 2 issuers must also file quarterly and annual reports with the SEC—a permanent compliance obligation, but one that is considerably lighter than the Sarbanes-Oxley requirements imposed on traditional public companies.

The Form 1-A versus the prospectus

Where a traditional IPO requires filing a full registration statement with a detailed prospectus, a Regulation A+ offering uses Form 1-A. The Form 1-A is shorter, less prescriptive, and written with the assumption that the company will explain itself in plainer language for retail investors. There is no preliminary red herring prospectus; the company files Form 1-A directly with the SEC’s Regional Offices (not the main Washington headquarters). The SEC reviews it—this is not a purely exempt offering—but the review is faster and the feedback is often less adversarial than a traditional IPO review.

Once the SEC declares the Form 1-A effective, the company can begin selling shares. Unlike a traditional IPO, which typically requires an underwriter and a syndicate, a Regulation A+ offering can be conducted directly by the issuer or with a lighter layer of intermediaries. Some use a “funding portal”—an online platform that acts as a broker of sorts, but with fewer compliance rules than a traditional broker.

Where Regulation A+ shares trade

A critical distinction: Regulation A+ shares are legitimate public securities, but they do not trade on major stock exchanges like the NYSE or NASDAQ. They trade over-the-counter, typically on electronic OTC systems or through market makers who specialize in smaller-cap stocks. This can create liquidity challenges for early shareholders; selling is not as frictionless as selling a NYSE-listed stock. However, the shares are fully transferable and represent real ownership, and in successful cases, a Regulation A+ company can later graduate to an exchange listing.

Some Regulation A+ offerings have been wildly successful—raising far more than the company anticipated and producing shares that trade at substantial premiums to the offering price. Others have been thin, with shares trading near the issue price and at wide bid-ask spreads. The liquidity and after-market success depend heavily on the quality of the company, the strength of its story, and the interest of institutional market makers.

The cost advantage and the trade-offs

A company can conduct a Regulation A+ offering for $500,000 to $2 million in all-in costs, compared to $10 million to $30 million for a traditional IPO. This is the main draw. But there are trade-offs. A Regulation A+ offering does not draw the same caliber of institutional capital or underwriter prestige as a traditional IPO. It does not generate the same media fanfare. Shares trade in less liquid venues. And the issuer, particularly a Tier 2 issuer, accepts ongoing SEC reporting obligations that persist indefinitely, turning a one-time capital raise into a permanent exercise in compliance and disclosure.

For a bootstrapped software company or a regional manufacturing firm, this trade is often excellent. For a venture-backed startup expecting a Series C in two years and then a traditional IPO, Regulation A+ is less attractive, because it commits the company to public reporting without the liquidity or prestige benefit.

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