Recent remarks by Keith Higgins, newly appointed Director of the SEC's Division of Corporate Finance, give us some early data on how issuers are making use of new Rule 506(c).
You'll recall that 506(c) is the rule that implements the lifting of the ban on general solicitation in offerings that otherwise meet the applicable Reg D requirements, and also limit purchasers to accredited investors who are subjected to a heightened verification standard. "Implements" refers to the Congressional mandate to do so, under the JOBS Act. (It's interesting to me that Higgins at least once in his written remarks refers to the Congressional mandate as "requiring the Commission to modify the prohibition against general solicitation," emphasis added.)
In a footnote to his written remarks, footnote 18 on page 10, Higgins relays the following information from the SEC's Division of Economic Risk Analysis (DERA):
"Based on the information reported in the initial Form D filings reviewed by DERA, as of October 18, 2013, there have been 170 new offerings made in reliance on the new Rule 506 exemption that became effective on September 23, 2013, with approximately $911 million in total amount sold in these offerings. In addition, 44 offerings that commenced in 2013, but before the effective date of the new Rule 506 exemption, were subsequently converted to offerings relying on the new exemption. Since the new rules became effective, the average offering size for Rule 506(c) offerings was $6.1 million, as compared to $22.8 million for Rule 506(b) offerings; the median offering size for Rule 506(c) offerings was $1.3 million, as compared to $1.8 million for Rule 506(b) offerings.
What does this suggest? Well, that issuers (be they startups or hedgefunds, we can't really tell from this data) are using 506(c); and that generally solicited offerings may be targeting smaller amounts than traditional 506 deals.
You may be thinking, the modest number of filings - some 200 - seems too small. After all, weren't thousands of startups going "public" with their "private" offerings on AngelList within hours of 506(c) becoming effective on September 23?
Ah, but recall that the filing deadline is 15 days from first sale. So there should be a healthy lag, at least as long as the current filing requirements remain in place (recall that proposed rules are out, imposing pre-filing requirements for 506(c) deals and lots of other not-so-fun changes for both 506(c) and 506(b)).