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SEC’s Division of Economic and Risk Analysis Publishes Massive Data-Driven Report on Securities Offerings Over the Past Decade

This blog post highlights what we believe are the 20 most interesting statistics in the DERA’s report on registered initial public offerings and secondary equity offerings, and exempt Regulation D, Regulation A and Crowdfunding offerings.

There are many interesting statistics for issuers, underwriters and other capital market participants contained in the SEC Division of Economic and Risk Analysis’s report on “Access to Capital and Market Liquidity” released on August 8. 

Here are our top 20:

1. Total capital formation from the signing of the Dodd-Frank Act into law in 2010 through the end of 2016 was approximately $20.20 trillion, of which $8.8 trillion was raised through registered offerings, and $11.38 trillion was raised through unregistered offerings.

Registered Offerings

2.  IPO activity reached highs in 2007 (298 deals, $62.6 billion in offer size) and 2014 (347 deals, $89.2 billion in offer size), and lows in 2008 (53 deals, $10.3 billion in offer size) and 2016 (119 deals, $10.7 billion in offer size).

3.  IPOs with proceeds up to $30 million accounted for approximately 17% of the total number of IPOs in the period from 2007 to 2011, and 22% in the period from 2012 to 2016, following the passage of the JOBS Act in 2012.

4.  In 2016, more than 75% of IPO issuers were classified as “emerging growth companies” (EGCs) under Title I of the JOBS Act.

5.  Capital raised through secondary equity offerings during the 1996 to 2016 period peaked in 2009 (858 deals, $208.5 billion in offer size).  Registered debt issuances during this period peaked in 2016 (1,636 deals, $1,325.2 billion in offer size).

Exempt Offerings

6.  Private market issuances of debt and equity (unregistered offering activity) increased from $1.16 trillion in 2009 to $1.87 trillion in 2015, and amounted to $1.68 trillion in 2016.

7.  For the period 2012 through 2016 aggregate amounts raised through exempt securities offerings of debt and equity exceeded amounts raised through registered offerings of debt and equity by approximately 26%. By comparison, the same figure for 2009 through 2011 was 21.6%.

8.  During the period from September 2013 through December 2016, there were 5,474 new Rule 506(c) offerings utilizing general solicitation and advertising, reporting a total amount sold of $108 billion. During the same period, there were 65,772 new Rule 506(b) offerings, reporting a total amount sold of $4,122 billion, based on Form D filings.

9.  The average amount reported sold in an initial Rule 506(c) offering was $13 million and the average amount reported sold in a Rule 506(b) offering was $26 million during the September 2013 through December 2016 period.

10.  Amounts raised in reliance on the general solicitation and advertising rules under Title II of the JOBS Act represented only 3% of total amounts raised pursuant to Rule 506 from September 2013 (when Rule 506(c) of Regulation D was implemented) through 2016.

11.  More than 66% of Regulation D offerings include equity securities. More than 99% of securities in Rule 144A offerings are debt securities.

12.  On average, 9% of new offerings under Regulation D included non-accredited investors for the period from 2009 through 2016. For financial issuers and real estate investment trusts (REITs), 13% of offerings had at least one non-accredited investor during that period, while only 1% of offerings by venture capital funds included at least one non-accredited investor.

13.  More than 260,000 investors participated in Regulation D offerings for the period from 2009 through 2016. For this period, the median number of investors per offering varied between two and seven across all types of offerings. The mean number of investors in nonfinancial offerings was nine, while the mean number of investors in financial, pooled investment funds (e.g., hedge, private equity and venture capital funds) and REIT offerings varied from 15 to 25.

Regulation A Activity

14.  Following effectiveness of amendments to Regulation A under Title IV of the JOBS Act (known as Regulation A+) in June 2015, there have been 97 qualified offerings seeking to raise $1.8 billion. This compares with approximately 14 qualified offerings seeking to raise approximately $163.3 million in a typical year during the period 2005 to 2016.

15.  Despite amounts sought through Regulation A. based on issuer reports of amounts raised filed during the period from 2005 to 2016, 56 issuers reported proceeds in Regulation A offerings totaling approximately $314.6 million.

Offering Fees

16.  Nonfinancial issuers paid on average approximately 6% in total fees for Regulation D offerings in the period from 2009 to 2016. By comparison, a company going public pays an average gross spread of 7% to its IPO underwriters, while a reporting company raising equity through a follow-on equity offering pays an average gross spread of about 5.4%.  

17.  Issuers raising capital through registered bond issues pay commissions between 0.7% and 1.5% of the size of the offering. By contrast to operating issuers, hedge funds raising capital through Regulation D offerings and private equity funds paid approximately 1%. Brokers and finders are no more costly, on average, than the underwriters who charge fees for registered offerings.

18.  Overall, Rule 506(c) offerings exhibited a higher level of financial intermediary usage (33% of new offerings) than Rule 506(b) offerings (17% of new offerings). Rule 506(c) offerings also pay higher fees than Rule 506(b) issuers. Operating issuers paid almost 6.1% in fees in 506(c) offerings, relative to 5.3% paid by such non-fund, nonfinancial Rule 506(b) offerings.

Crowdfunding

19.  From May 2016 through December 2016, excluding 24 withdrawn offerings and potential duplicate filings, there were 163 unique crowdfunding offerings by 156 issuers (including seven issuers that filed for more than one crowdfunding offering). Of those, 28 offerings reported meeting their target amount on Form C-U as of December 31, 2016. The average offering from May 2016 through December 2016 targeted approximately $110,000. For almost all of these offerings, oversubscriptions up to a higher maximum were accepted. Of the offerings that reported having raised at least the target amount, the average amount reported raised was approximately $290,000.

20.  The most popular security issued in a crowdfunding offering was common or preferred equity, accounting for 36% of offerings. Debt accounted for 20%, and there were various other security types, such as units, convertibles, “simple agreements for future equity,” (SAFEs), and others (including revenue sharing and membership / limited liability company (LLC) interests).