IPOs have slowed since 2014, but there could be a lot more public entrants if one firm continues its initial success.
BANQ, a division of TriPoint Global Equities, has found success with “mini-IPO” deals under Regulation A+, the rules put forth in the JOBS Act 2016 that allow investments from non-accredited “crowd” investors.
At first blush, the rules seemed overly complicated for Main Street and not profitable enough for Wall Street. But under CEO Mark Elenowitz, BANQ streamlined the process for a robotic arm company called Myomo, showing both streets what was possible.
It works like a typical IPO, but with a $50 million funding cap. It does alllow direct marketing to potential investors, which is illegal under traditional IPO guidelines.
“That’s the power of Reg A. When you look at Reg A and you look at consumer products and hospitality companies that we work with, now you have fans, you have customers, you have a loyal affinity group that finally gets a chance to participate in an IPO,” said Elenowitz, adding it also turns investors into customers. “You can take a shareholder who has never heard of you and suddenly you’re seeing it and you can turn a potential investor into a customer, so you’re really getting two bites of the apple.”
BANQ now has a robust pipeline of deals including FAT Brands, parent of the Fatburger franchise, which is looking for $20 million in public equity to fuel growth and acquisitions.
It won’t work for everyone—companies must look and act like a public company and be able to spend time and money on reporting indefinitely, a cost that adds about $500,000 to yearly company costs. But where it works, it works well.
“If you’re doing a $50 million deal or less, there’s no reason to do a standard deal again,” said Elenowitz.