Markets
Judd Hollas

Uncertainty Remains on Eve of Exempt Offering Advertising

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Beginning on Sept. 23, companies will for the first time in 80 years be able to advertise offerings of securities exempt from registration, as the ban on general solicitation officially expires. Crowdfunding portals, angel capital providers, venture capital funds and other proponents of startups and small growth companies have been looking forward to the day ever since April 2012. That’s when Title II of the JOBS Act required the Securities and Exchange Commission to end the ban on general solicitation in Rule 506 offerings under Regulation D as long as buyers of the securities were accredited investors. In July, the SEC approved the creation of Rule 506(c), which allows issuers to advertise exempt offerings, as well as other regulations related to Title II.

Markets

Market Wobbles Fail to Deter Deals

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The recent spike in market volatility over the past few weeks has yet to temper the bullishness of growth companies, investors or bankers in what so far has been a robust year of private placement deal making. The pace of transactions remained steady in June despite a 500-point drop in the Dow Jones Industrial Average to begin the month. That was followed by a mid-month seesaw ride that led to a 760-point drop over two-and-a-half days and then a strong rebound in the final week. Companies raised about $1.1 billion in 33 growth equity private placement transactions (GEPPs) in June through the final trading day of the month, according to PlacementTracker, a division of Sagient Research. Additionally, eight growth issuers established at-the-market agreements that could raise a potential $370 million.

Markets
Cromwell Coulson

OTC Markets’ Coulson Testifies to House Capital Markets Committee

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R. Cromwell Coulson, CEO and president of OTC Markets Group (formerly the Pink Sheets), addressed the financial needs of small public companies in a June 12 presentation to the U.S. House of Representatives Capital Markets and Government Sponsored Enterprises subcommittee. The hearing was entitled, "Reducing Barriers to Capital Formation." Coulson began by outlining his primary concerns. "We want more openness so our public markets are more inclusive, we want better transparency so our public markets are better informed, and we want more connectivity so our public markets are more efficient," Coulson said. "Finally," Coulson continued, "we want to remove unneeded regulatory burdens in order to reduce the cost and complexity imposed on smaller public companies."

Markets

Premium Underpinnings: Raising Growth Capital Above Market

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As some private placement funds have begun to use the PIPE market as a platform to support emerging growth companies rather than a launch pad for a technical trading strategy, one would expect that more favorable issuer terms would begin to surface. In fact, a review of deals over the last few years reveals that investors are willing to pay above-market prices for a growth company’s securities about a quarter of the time – a practice that’s decidedly out of harmony with broader market tendencies. Growth Capital Investor analyzed growth equity private placements (GEPPs) from Jan 1, 2010 to May 20, 2013 using data provided by PlacementTracker, a division of Sagient Research. GEPPs are offerings of a least $1 million of stock or equity-linked debt that feature fixed purchase, conversion and warrant exercise price terms, and that are sold by companies that have market capitalizations from $10 million to $1 billion as well as a share price of at least $1 at closing. The review included unregistered and registered common stock deals that featured a premium purchase price of at least 1% and no more than 100%.