• Dec. 9, 2016, 1:43 am

Anatomy of the First Reg A+ Deal – a post mortem

Whenever we produced a conference with DealFlow Media, the entire event team would gather after the show and do what we called a “postmortem.” During this meeting, we critiqued the event we just produced, focusing on the things that didn’t go as planned. The idea was simple and effective: Learn from our mistakes so we didn’t make them again.

With each postmortem, we became increasingly critical of ourselves. Nitpicking everything about the event, from the marketing and signage, to the programming and speaker choices, to the hotel and venue logistics. Even things we had no control over, like the weather, were fair game.

It’s been a while since our team ran an in-person conference, but we’ve been revving up our events machine and on Wednesday we hosted 650 people who registered for our recent webcast, “Anatomy of the First Reg A+ Deal,” which mostly covered the do’s and don’ts learned from the Elio Motors transaction.

I don’t have to be a brilliant trend-spotter – or a straight A student – to recognize that with this many people signed up to learn about Reg A, there’s serious interest in this area.

So with this in mind, I thought it would be useful to do something of a postmortem here too. Not so much on the webcast (I’ll reserve my critique for office discussion only), but on the Elio deal itself.

Here are 10 key takeaways I had after listening to the panelists:

  • Retain an “underwriter” (i.e. lead broker-dealer) to assist in the marketing of the deal, the closing of the transaction, and the coordination of shareholder communication;
  • Expect that the underwriter and syndicate brokers will need to proactively sell potential investors – and that you’ll have to pay those brokers customary banking fees;
  • Expect lots of comments from the Securities and Exchange Commission during the filing process as the review will be similar to that of an S-1 filing;
  • Plan for a complex legal process that resembles a self-underwritten offering;
  • Allocate a meaningful marketing budget as selling the deal to main street-type investors will require broad outreach and a “merchandising mentality”;
  • Expect the time from filing Form 1-A to closing on funds to exceed 6 months;
  • Deal with blue sky registration head-on – for the initial offering and/or sales in the aftermarket;
  • Be prepared to educate prospective investors on how shares may (or may not) be traded on a secondary market;
  • Expect issues in getting shares deposited at brokerage houses as most brokerages are still unfamiliar with Regulation A;
  • And…keep your nomenclature straight… this isn’t crowdfunding!

This postmortem is by no means exhaustive. To be sure, there’s still plenty to learn. In the coming months, there will undoubtedly be a variety of ways these Reg A+ deals are structured and marketed. Count on me to follow the trends and discuss my observations in this blog.

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