equity, fundingLet’s say in section 13 of an SEC Form D, a company lists its total offering amount as $1,000,000 while they only list $750,000 as the amount sold and the difference is listed as a remaining amount to be sold.
Does that mean the company closed a $1,000,000 funding round or does that mean they attempted to raise $1,000,000 but only actually raised $750,000? The Form D was filed a month ago so I think it’s possible the funding round isn’t complete yet? What happens if there are no other investors to complete the round (i.e. do they need to reach the entire offering amount)?
I’m looking for any information related to what the Form D actually means in terms I can understand, unlike the SEC’s documentation.
See Rule 503(a)(1):
An issuer … must file with the Commission … Form D … no later than 15 calendar days after the first sale of securities in the offering
So, on to your questions:
Does that mean the company closed a $1,000,000 funding round or does that mean they attempted to raise $1,000,000 but only actually raised $750,000?
The latter.
Suppose that, on November 1, ABC Inc. offers $1m of shares for sale under Regulation D: at this stage, it has no obligation to file papers with the SEC. A week later, on November 8, it starts to receive acceptances to its offer—shares are beginning to be sold: it now has 15 days to file Form D. Even if waits the full 15 days, it may still find that the full $1m is not completely sold by that point; so at the time it is filed, the form might depict (as you describe) $750k sold with $250k remaining to be sold.
The Form D was filed a month ago so I think it’s possible the funding round isn’t complete yet?
Entirely possible.
However, it’s also possible that the remaining amount was sold after the Form D was filed. Note that Rule 503(a)(3)(ii)(F) makes it explicitly clear that the issuer does not need to file an amended Form D in this case.
What happens if there are no other investors to complete the round (i.e. do they need to reach the entire offering amount)?
No, the offering can be withdrawn without it having been fully subscribed. Those who accepted the offer will have the shares that they bought and the company will keep the proceeds from those sales—it simply won’t have sold as much as it had liked. That said, some investors may only provide “conditional acceptances” that indicate that they will only buy the shares if a certain amount of investment is raised.
Alternatively, the company may decide to continue the offering until the full offered amount has been raised. No time limit is imposed, although under Rule 503(a)(3)(ii) an amended Form D will need to be filed if the issuer originally indicated that the offering was not intended to last more than a year (Item 8) but that has since changed; and under Rule 503(a)(3)(iii) further updates will need to be filed annually thereafter until the offer is withdrawn.
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