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BUSINESS
SCOTTSDALE PROGRESS | WWW.SCOTTSDALE.ORG | FEBRUARY 16, 2020
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Local investment firm eyes raising $50M BY WAYNE SCHUTSKY Progress Managing Editor
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Scottsdale-based real estate investment firm launched its first online public offering in February, capitalizing on years of growth driven by investments in Opportunity Zones throughout Arizona. On Feb. 5, Caliber hosted a party in downtown Phoenix to announce a Reg A+ campaign to raise up to $50 million over the next 12 months by offering 12.5 million shares at $4 per share. Caliber’s announcement was not the kickoff for a traditional IPO, though. Reg A+ was included in the 2013 federal JOBS Act as a way to make it easier for entrepreneurs and small businesses to generate investment. The law also made it easier for individuals to invest in these ventures by lowering the financial qualifications required to invest. Chris Loeffler, Caliber’s co-founder and CEO, called the process “a big wide platform (with) lots of shareholders – everybody gets to participate in growing the company.” Typically, investors in new companies must be accredited with a yearly income over $200,000 or net worth of at least $1 million and meet high investment minimums dictated by the firms. Reg A+ significantly lowers the threshold. “What it allows us to do is raise up to $50 million from almost anybody, “Loeffler said. “They don’t have to be an accredited investor anymore…their limitation, per the SEC’s rules, is they can invest up to 10 percent of their net worth.” The minimum investment in Caliber’s Reg A+ offering is $2,500, well below the minimum investment of $35,000 to $250,000 in its funds.
Caliber CEO Chris Loeffler, right, listen's to a speaker at his company’s first public offering. (Courtesy of Caliber)
Loeffler views the lower barrier as an asset and said it will allow many of the individuals who have followed the company for years – from subcontractors to real estate agents – to invest in the growing company. According to the SEC, there are some basic requirements companies have to meet before becoming eligible for a Reg A+ offering, including complying with provisions designed to prevent “bad actors” from taking advantage of the system. Caliber, which is pursuing a Tier 2 offering allowing for up to $50 million, also must provide audited financial statements and file annual and mid-year reports to the SEC. Even with these protections in place, Reg A+ has received significant criticism since the SEC finalized rules in 2015 due to relative lack of success associated with the fundraising model. Even companies once held up as Reg A+ success stories have taken hits in recent years. Just weeks ago, the SEC announced it reached a $400,000 settlement with Venkata Meenavalli, CEO of Longfin
Corp, over allegations the fintech company lied about being based in the U.S. Over the course of its investigation, the SEC recovered $26 million in “illgotten gains” from Longfin, once considered one of the most successful Reg A+ companies. Loeffler said Caliber is something of an outlier when it comes to Reg A+ offerings because it is not a startup and has a decade-long proven track record. “We’re one of the few companies that has lots of assets and has lots of momentum and that has 12 years of operating history allowing people to invest via this vehicle,” Loeffler said. According to Caliber’s SEC filing, the company has $172,726,013 in total assets versus $165,642,447 in total liabilities. The Barron’s report backs up Loeffler’s argument. According to Barron’s, the over 300 Reg A+ offerings it analyzed, which included everything from cannabis paraphernalia and flying cars to a UFO venture by former Blink 182 guitarist Tom DeLonge, were short on proven concepts. “Proven ideas like this are rare among
microcaps,” Barron’s noted, referencing BrewDog, a successful Scottland-based brewpub chain that used Reg A+ to expand to the U.S. Based on its proven track record, Caliber appears to have more in common with BrewDog than the other businesses that have used Reg A+ in the past. Loeffler said the next step for the company will be listing on an exchange and pursuing a more traditional IPO, though he declined to comment on a timeline for those moves, citing industry rules. Caliber leadership made the decision back to jump on Opportunity Zones early while many others were waiting for more guidance from the federal government. In 2019, Rodney Riley, Caliber’s director of acquisitions and development, told the Progress the decision tied directly into its early talks about going public. The company was building up its accounting and legal teams as it explored the possibility of going public, which also gave the company the resources and people it needed to get a head start on the considerable compliance requirements associated with opportunity zones when talking about the potential legislation began to heat up. CEO Chris Loeffler “saw it as opportunity to take advantage of what we were already building,” Riley said. Loeffler is bullish on the company’s ability to sustain its growth through this latest fundraising effort. According to the company, the Reg A+ offering will allow the company to scale its operating, reduce debt, invest in its funds and improve infrastructure and operating and control systems.
