The Microcap Market Finally Cuts Toxic Lenders: Reg. A+ and Reg. CF Poised to Safeguard the Industry
Updated: Sep 22, 2020
“The microcap markets are a cruel and unusual bazaar.” — Ajene Watson
From where we sit, things just got a whole lot crueler, and a lot more bizarre for microcap companies trading on the OTC Markets.
In an unprecedented but necessary move, the SEC has officially targeted so-called penny stock financiers (aka “Toxic Lenders”), most of whom are ultimately responsible for the type of toxic financing that could be tried as an accessory to the murder of a microcap company’s potential. Think about it…Why would a public company’s stock price get pushed down to ‘sub penny’ levels, trade with great volatility (but mostly sideways), and see its Issued and Outstanding increase by many multiples, with nearly 100% of the newly issued stock landing in the float? Hmmm...
Wouldn’t you agree that it’s about time the SEC stopped this madness?
The question now however becomes, ‘Now What?” The unfortunate fact is, the majority of the microcap companies trading on the OTC Markets survived due to this toxic funding. It was a necessary evil. But with the SEC having recently won a case against one of these Toxic Lenders, the demons are being routed out of the microcap marketplace, as a new precedent can potentially be set. That precedent would cause Toxic Lenders to register as dealers in order to keep operating as they do. Don’t hold your breath!
So, how will these microcap companies find capital now? And, it is important that they do, because if they fail, so do all of their shareholders. In particular, the biggest losers will be the smaller mom and pop investors - that have poured money into purchasing the stock of these companies.
Well, as the old adage goes, when one door closes, another one opens. In this case, a very successful door with a proven track record has flung wide open. A big Hello to the JOBS Act and equity crowdfunding’s Reg. A+ and Reg. CF!
Back in 2012, then-President Barack Obama signed the JOBS Act into law – the Jumpstart our Business Startups Act. With that, opened a bunch of new doors for businesses of all sizes, both public and private. Two of those doors, which have since become golden entrances, are known as Titles III and IV of the JOBS Act, or more specifically, Regulation Crowdfunding and Regulation A+, respectively.
Regulation Crowdfunding (“Reg. CF”) and Regulation A+ (“Reg. A+”) allows private and public companies the ability to advertise their offering and to raise money from both accredited and non-accredited investors. This means that anyone can invest in a startup or development stage company. In this case, public companies trading on the OTC Markets, and these investments can be made in a safe and secure way, without fear of that company’s stock value being eroded by Toxic Lenders.
So, whether you are a public company looking to raise money, or a microcap investor interested in investing in a viable project, there is likely no better time than now to get involved. While the SEC continues forward with their righteous pursuit to rout out the evil of Toxic Lenders and level the playing field for all shareholders, equity crowdfunding’s Reg A+ and Reg. CF remains at the forefront, to assist public companies in raising money and assisting investors in finding fair, unique and equitable opportunities.
If you didn’t know that more than $1 Billion has been raised to-date among all crowdfunding platforms, now you know. Interested in learning more? Visit truCrowd.com, rated one of the top-10 equity crowdfunding platforms in the marketplace.