The JOBS Act: The Key to a Kinder, Gentler Public Offering?
Lane Powell Shareholder Brian DeFoe authored an article in Seattle Business magazine’s September 2015 issue titled “The JOBS Act: The Key to a Kinder, Gentler Public Offering?” In the article, DeFoe discussed the Jumpstart Our Business Startups Act (the JOBS Act), which was enacted in 2012 and contains a number of measures to ease access to capital investment for smaller companies, as well as how the act may benefit companies looking to go public.
By taking advantage of Regulation A, a company can make a small public offering of its debt or equity securities to potential investors. “Public” is the key word here, as the company will be permitted to sell its securities using advertising and other forms of general solicitation that are typically prohibited in a traditional private placement. As a bonus, because Regulation A is not technically a private placement under federal securities laws, the securities received by investors (at least investors who are not company insiders and affiliates) will generally be freely tradable after the offering. Of course, there are some hoops to jump through, and the first among those is that the issuer will need to comply with the SEC’s Regulation A offering process. That means that the issuer will need to prepare a disclosure document on SEC Form 1-A and have that filing qualified for use by the SEC before actually offering to sell the securities described in the filing.