Author: Vladimir Ivanov - https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=333355 Scott Bauguess - https://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=334615
- Source link: https://www.sec.gov/files/acsec103111_analysis-reg-d-offering.pdf
Regulation D offerings make up a large portion of all offerings in the US. Regulation D is likely fulfilling its goal of targeting capital needs of small businesses, given the large number of small offerings subject to it. Trends in capital raising show a shift from public to private capital.
- How helpful? Scale of 1 to 5
- Topic Tags
Regulation D, Regulation D goals, small business, small offering, capital raising, private capital, Rule 504, Rule 505, Rule 506
- Relevant questions addressed
How has Regulation D impacted the world of private offerings? How is the private offerings horizon changing?
- Summary bullet points
- Private offerings through Form D were large and on a rise in the late 2000s and early ‘10s ($905 billion in 2010)
- The average offering is modest compared to the aggregate amount ($30 million), with a highly skewed distribution (median of $1 million)
- Regulation D managed to target facilitation of small companies’ private offerings
- Most of the issuers are using Rule 506 of Regulation D
- It provides exemptions on private offerings
- It imposes no limits on the offering amount
- It requires no registration
- The investors can be an unlimited amount of accredited investors and up to 35 non-accredited investors
- When the paper was written, no general solicitation was allowed under Rule 506
- Rule 504 and 505 have similar regulation and impose limits on amounts raised
- Regulation D capital is a more permanent source of capital than debt as it is equity. It has overtaken debt as a source of capital in 2010.
- The shift towards private fundraising from public fundraising. It could be because of heavy regulatory burdens imposed when going public, or because of “cold issue” markets
- In 2011 capital raised by foreign issuers increased more than capital raised by domestic issuers, signifying the US is competitive with foreign markets.
- Even though Rules 505 and 506 allow some non-accredited investors to take part in private offerings, this was not common. Many investors tend to be involved in Regulation D offering.
- Follow-up links
Initial public offerings in hot and cold markets - https://www.jstor.org/stable/30031871?seq=1#metadata_info_tab_contents
Rules 504, 505, 506 of Regulation D - http://www.sec.gov/answers/regd.htm