The Problem Solved by Continuous Offerings
Period to the introduction of Reg A+, companies with existing stock trading are willing to sell with the old Reg A. To achieve this, the price of the price of the stock had to be relatively reasonably compared to the market price. But, the market price by small companies can be unpredictable or volatile. To enable the company changes the offering price, the company must file an amendment of its Reg A+ filing, and it takes weeks to get the approval by the SEC. During this period of waiting, changes in the market price automatically mean that pricing would be out of date.
After the offering is approved by the SEC, companies have the right to offer stock at various prices over a period through the new Reg A+. At the time of sale, pricing information is filed after sale as a supplement which does not require the SEC review.
Terminology
First, there is a need to understand the difference between “supplementing” and “amending” a Reg A offering. Both supplementing and amending occurs after the Reg A offering is “approved” by the SEC. Reg A offering is certified or approved when the company can cash investor checks upon the release of the offering by the SEC. If the offering is yet to be certified, then it is still under review by SEC.
Amending occurs when there is a major change and filing the amendment requires the SEC to review the offering once again.
Supplementing the offering occurs when no major change is made, and SEC does not have reason to review the offering.
In traditional IPOs, the sales document is referred as the prospectus while in Reg A offering, it is referred as the “offering circular.” Traditional IPOs a registration statement that contains the prospectus is file with the SEC while in Reg A IPOs file offering statements that contain the offering circular with the SEC.
Continuous Offerings
In continuous offering, all the offered stock is not sold at the beginning after the approval of the offering. Some stock is kept for future sale.
The company requires being up-to-date in its semiannual and annual report filling during the sale time to have a continuous offering.
You can do a continuous offering (1) for selling shareholders, (2) for a dividend or an employee benefit plan of the issuer, (3) for securities issued upon the exercise of outstanding options, warrants, or rights, for securities issued upon conversion of other outstanding securities, (4) for securities pledged as collateral, or (5) securities that are part of an offering which commences within two calendar days after the qualification date, will be offered on a continuous basis, may continue to be offered for a period in excess of 30 days from the date of initial qualification, and will be offered in an amount that, at the time the offering statement is qualified, is reasonably expected to be offered and sold within two years from the initial qualification date.
How to do a continuous offering
(1) Through selling shareholders,
(2) Through an employee benefit plan of the issuer or a dividend,
(3) Through securities issued upon the exercise of outstanding options, rights, or warrants, for securities issued upon conversion of other outstanding securities,
(4) Through securities pledged as collateral, or
(5) The securities that are part of an offering which starts within two days after the approval date, may be offered on a continuous basis for a maximum period of 30 days from the date of first approval at the exact amount during the period the offering statement is approved, and is reasonably expected to be offered and sold within 24 months from the first approval date
Continuous offerings will be used by most companies for selling shareholders and stock that will be sold within the next twenty-four months after the offering is approved.
Many companies will utilize continuous offerings for shareholders sales and stock that is intended to be sold within the next two years after the offering is qualified.
Bear in mind that the stock that is tagged “at the Market offering” cannot be sold into the market. The quoted simply means that you are bringing sell order into the market exactly as an ordinary shareholder holding free trading stock would do. Before you can hit the bid, you’ll have to find a buyer.