For many investors in the private market, one of the risks they face is the lack of a liquid market for selling shares.
Through a Reg A+ offering, however, accredited investors who purchased securities during a Reg D or Series A raise can sell a portion of their holdings, creating a powerful buy incentive.
The law allows issuers to allocate up to 30% of their Reg A+ offering to selling shareholders, and investors are under no obligation to sell stock.
What is a Selling Shareholder?
A selling shareholder is an individual or entity that sells securities of a company in a registered offering.
The shares sold by selling shareholders are first offered to other shareholders on a pro-rata basis before being made available to the general public.
Selling shareholders are typically early investors in a company who are looking to cash out some of their investment. They may also be employees or insiders who are looking to sell a portion of their holdings.
In some cases, selling shareholders may be venture capitalists or other institutional investors who are looking to exit their investment before a company’s IPO.
Selling Shares with a Reg A+ Offering
The Reg A+ selling shareholder allowance is a valuable tool for companies seeking to raise capital from accredited investors.
For investors to sell their shares with a Reg A+ offering, the company must file an amendment to their offering circular with the SEC that includes a selling shareholders section.
The amendment must disclose the number of shares being sold and the maximum offering price. In addition, all selling shareholders must be identified in the 1A.
The Reg A+ selling shareholder allowance is a great way for companies to raise capital while letting investors potentially get a return on their initial investment.
The allowance also provides an incentive for accredited investors to participate in a Reg A+ offering, as they can receive immediate liquidity without waiting for a company to go public.
If you’re considering a Reg A+ offering, consult with your securities attorney to determine if the selling shareholder allowance is right for your company.