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Evolution of a New Capital Landscape
On March 25, 2015, the Securities and Exchange Commission announced that it had adopted the final Regulation A+ rules, enabling private companies qualified by the SEC to offer and sell up to $20 million worth of securities under Tier 1 requirements, and up to $50 million under Tier 2 requirements, to both accredited and non-accredited investors.
Eleven months after this announcement, on Feb. 25, 2016, the SEC’s Advisory Committee on Small and Emerging Companies met to discuss the ongoing evolution of this new capital landscape.
According to the opening remarks of Mary Jo White, SEC Chair, “Since Regulation A+ became effective in June 2015, issuers have publicly filed over sixty offering statements with the Commission.”
Of the more than 60 offering statements, 19 have been qualified, as of Feb. 15, 2016, according to a presentation by Scott Baugess, Deputy Director and Deputy Chief Economist for the SEC’s Division of Economic and Risk Analysis. The presentation noted that $1.3 billion in total capital has been sought under Regulation A+, with $290 million currently qualified.
The $290 million in qualified filings represent a diverse group of capital-seeking companies, from an automaker and dental device manufacturer to a high-tech aviation company and a multi-divisional cannabis company, among others.
The offering by Med-X, the multi-divisional cannabis company, is by far the most intriguing because funding a cannabis company, even if it doesn’t touch the plant, as is the case for Med-X, is beleaguered by accredited investors who aren’t comfortable investing in cannabis-related ventures just yet.
With Regulation A+ allowing the general public to buy shares from qualified companies, Med-X is blazing a trail that other capital-seeking cannabis companies should study.
Med-X Offering Goes Live
On Feb. 9, 2016, Med-X, the first cannabis company to be qualified by the Securities and Exchange Commission to sell shares to the general public through Regulation A+, began accepting investment funding on StartEngine.com, beginning at the $420 level or 700 shares.
“This offering presents a tremendous opportunity for American investors seeking to get in on the ground floor of the burgeoning cannabis industry — without the normal accreditation requirements for start-up companies,” said Matthew Mills, COO of Med-X.
In regards to the progress made since the launch of the live offering, Mills said, “It’s going very well, hundreds and hundreds of investors are flocking and purchasing shares.”
Because Regulation A+ allows a startup to turn to secure capital from members of the general public who believe in the company’s mission, the sentiment from shareholders can bolster the enthusiasm.
According to Mills, “We have spoken to several investors and everyone is excited to be a part of this history making moment!”
And while that sentiment can certainly fuel an adrenaline rush, Med-X has prioritized specific benchmarks to direct when and how the newly raised capital will be used.
“We have already been drawing down capital from the offering and its being put to work immediately to continue to draw awareness to Med-X as a company while also in the final stages of packaging for our new Nature-Cide Professional Growing Medium, ” Mills explained.
Because Med-X is finalizing the packaging for Nature-Cide, an all-purpose insecticide, it has entered several discussions to license and distribute the Nature-Cide product lineup, with plans to launch a national marketing campaign during the latter part of the second quarter.
Regulation A+ could be a game changer for the legal cannabis industry because it lets everyday cannabis consumers financially support the companies they love.
If you would like to learn more about Regulation A+ and Med-X, join Matthew Mills at the California Cannabis Business Expo on March 3-5, 2016, at the Hilton Union Square in San Francisco.