Private capital raises via Regulation D far outnumbered other types of capital raises, including IPO's and Regulation A in 2016.* The capital markets have clearly spoken—and the amount of capital raise activity via Reg D dwarfs all other capital raise exemptions in both number of offerings and dollars raised.
Private capital markets continued to boom last year with more than 37,000 issuers filing Form D’s and reporting $1.3T in capital raised*, according to initial filings and amendments reported throughout the 2016 calendar year.
WealthForge helped issuer clients complete over 100 offerings in 2016, representing more than $110M in aggregate capital raised from 1,400+ participating investors. We have now completed almost $300M in transactions over the course of our firm's short history. See the infographic below for our 2016 Year in Review.
To put things in perspective, the IPO market remained frozen in 2016 seeing the least amount of dollar volume raised in over a decade—and the fewest number of filings since 2009. In total, 89 companies raised a sum of $18B by “going public.” We believe that the lackluster IPO numbers are a result of companies choosing to remain private for many reasons, including the high financial cost of completing an S-1, the administrative responsibilities and reporting burdens of public companies and their management teams, and the ability to be able to raise more capital in the private market while accessing liquidity via secondary sources. However, having a warm IPO environment is important for private market health as many private companies and their investors can benefit from a positive ramp to liquidity.
2016 also saw some growth in the newly enhanced Regulation A market. This regulation still has its challenges and friction compared to Reg D, however the upcoming year could show promise towards bringing back the small cap IPO and securities sales syndicates which can now be conducted via this avenue.
Lastly in 2016, Regulation Crowdfunding (Title III of the JOBS act or Reg CF) was finally approved, going into effect on May 16, 2016. Since its inception earlier this year, more than 100 companies have successfully raised equity and debt investments via Crowdfunding. The total of $16M raised across all market participants in 2016 is still very small, and pales in comparison to the Reg D market size. In fact, the $16M raised via Crowdfunding only equates to about 18% of the volume completed on the WealthForge platform via Reg D in the same timeframe. It is our opinion that from a macro view of the capital raising environment, Crowdfunding regulation is still prohibitive in size and will not be a very deep market in the upcoming year for issuers or investors unless new rules to increase thresholds and lessen the burdens and limitations on those issuers and investors are enacted.
As our infographic above demonstrates, 2016 was an exciting year of growth in both the private market and at WealthForge. Cheers to an even more successful 2017!
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Disclaimer: WealthForge provides this information to our clients and other friends for educational purposes only. It should not be construed or relied upon as legal advice. Private securities offerings may have a long holding period, be illiquid, and contain a high degree of risk. Investors must be able to afford the loss of all of their principal. Projected returns may significantly differ from actual results. Past performance does not indicate future results. Potential investors should consult with a knowledgeable tax advisor prior making an investment.
