American businessman and television personality Mark Cuban (pictured) on Thursday told a gathering of hedge fund titans that he is excited about a recently approved IPO alternative approach for raising money set up by the Securities and Exchange Commission, calling it a "huge opportunity"
"The opportunity is there but the culture, particularly in Silicon Valley has to change," Cuban told hedge fund managers at the annual SALT conference in Las Vegas.
Cuban said he was supportive of a new rule adopted roughly a year ago know informally as Regulation A+, which was mandated by the JOBS Act. The measure allows companies to raise up to $50 million annually without many of the regulatory disclosure costs and delays associated with an initial public offering as part of a process that seeks to expand on existing so-called Reg A offering rules for raising up to $5 million. Many backers, including Cuban, view the offerings as a sort of stepping stone to full-blown IPOs.
"The SEC has Reg A+, which simplifies the paperwork for [a] $25 million or $50 million offering," Cuban said. "These rules with Reg A+ have just been crystallized recently and there is a huge opportunity and I've been talking to folks about creating a fund that says the goal is to invest in startup, but part of the effort is we're going to try to take them public within four to five years."
Cuban suggested that the goal of the fund would be to counter the culture of Silicon Valley, where the big tech giants acquire upstart companies before they can thrive and act as real competition on their own. "Imagine if Instagram was public. Imagine if Whatsapp was public," Cuban said. "What kind of discussion would we be having about Facebook with a competitor like Instagram where messaging could be dominated by a different company other than Facebook. Facebook has good R&D but if there is a competitor they're buying them."
The most controversial part of Reg A+ -- and the one that proponents contend is its most attractive attribute -- is its exemption from most state securities regulation, which would allow issuers to avoid an entire extra layer of oversight. Issuers seeking to raise up to $20 million, classified as Tier 1, can choose between federal or state registration. And the SEC's Tier 2 rule prohibits state securities regulators from requiring issuers seeking to raise up to $50 million from registering with states or subjecting their offerings to state qualifications.