Companies acquiring a Reg A+ exemption from the SEC to build capital must signal whether they intend to sell shares under a Tier 1 or Tier 2 offering.
These two tiers have benefits and drawbacks that will determine which raise is right for you.
Tier 1 offering: Raise up to $20 million USD in any 12-month period. This figure may include up to $6 million USD in secondary sales by the issuer’s affiliates. Companies also need to be SEC qualified as well as their offering statements by state security regulators in the states in which they plan to sell their securities.
Tier 2 offering: Raise up to $75 million USD from equity investors over the course of any 12-month period. This total may include secondary sales to a maximum of $22.5 million USD in secondary sales from their affiliates Unlike Tier 1, the offering statement does not have to be qualified by state securities regulators.
Tier 2 mainly provides the greatest flexibility and opportunity for companies looking to raise capital. Noticeably, Tier 2 provides a higher offering limit and is not subject to Blue Sky regulations, while Tier 1 is subject to Blue Sky regulations that require registration with each individual state from which investments will be accepted.
Look at the chart below for a quick comparison of each tier.
Major Differences: Tier 1 vs. Tier 2 Offerings
|Tier 1||Tier 2|
|Offering Limits||Between $0 and $20 million in a 12-month period||Between $0 and $75 million in a 12-month period (as of March 15, 2021)|
|State Regulations||No restrictions on investments from non-accredited investors||Non-accredited investors are only allowed to invest a maximum of 10% of their total income or net worth (unless securities are to be listed on a national securities exchange)|
|Investor Limits||No restrictions on investments from non-accredited investors||Non-accredited investors are only allowed to invest a maximum of 10% of their total income or net worth (unless securities are to be listed on a national securities exchange)|
|Audited Financials||The financial statements filed as part of the offering circular are not required to be audited||Financial statements must be independently audited according to GAAS or PCAOB standards|
|Reporting Regimes||No ongoing reporting regime is required; companies must submit an exit report 30 days after the offering closes||Requires an ongoing reporting regime, including annual, semiannual, and current event reports|
Final Points Before You Decide
If you’re planning to raise capital from only one or two states then tier 1 may be a good option for you. However, this is not typically the case as the goal of most issuers is to make their raise available to as many investors as possible. Remember, the advantage of Reg A+ is that it allows you to raise and advertise to a much broader pool of retail investors. Issuers looking to leverage the full benefits of Reg A+ usually opt for Tier 2—raising from any investor, anywhere, up to $75 million.