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How Regulation A+ Is Creating Evergreen Funds

Tier 2 Regulation A+ has revolutionized the process for capital syndication with more companies every year choosing to deploy Regulation A+ offerings to raise capital. An interesting dynamic associated with Regulation A+ and investment funds is the ability for a fund to operate in an “evergreen” manner by using the selling shareholder feature of Regulation A+ to provide shareholder liquidity.  More detail on these concepts is below:

  1. Selling Shareholder Feature: In the context of securities regulation, a selling shareholder refers to an existing shareholder of a company who is selling their shares to other investors. In a Regulation A+ offering, existing shareholders may be allowed to sell their shares alongside the company’s primary offering with up to 30% of the offering dedicated to selling shareholder sales. This can provide liquidity for these shareholders and allow them to realize gains from their investments.
  2. Evergreen Fund: An evergreen fund is a type of investment fund that continuously operates, meaning it continually offers new shares to investors while redeeming existing shares. This setup allows the fund to be “evergreen” in nature, with a perpetual cycle of fundraising and capital distribution. By using Regulation A+ each year to syndicate new capital the fund can not only raise additional funding for new investments but also provide a liquidity event for current fund shareholders.

Prior to Tier 2 Regulation A+ many funds would operate “closed end” with a definitive fund termination date in order to provide for liquidation of assets and liquidity for investors. The selling shareholder feature of Regulation A+ changed the dynamic on how fund managers view liquidity and the ability to operate in an evergreen manner. 

Interested in executing a Regulation A+ offering? Call us today to discuss: (720) 586-8610


Tuesday August 15, 2023

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