Shelf Registration as a Post-IPO Financing Option for Companies

Companies that have already gone public may want to preserve the option to offer additional shares on the market at a later date. This may correspond with a new product launch, a future acquisition, or other major corporate event involving a need for additional financing. The shelf offering process allows a public company to file a shelf registration statement with the Securities and Exchange Commission (SEC) that will enable the company to sell the registered securities, or take them “off the shelf”, at a later time relatively quickly. Companies commonly use shelf registrations when they wish to sell securities at a future date without much lag time.

Advantages of Shelf Offerings

There are a number of benefits of shelf offerings for public companies. The most notable benefits are timing and certainty. Shelf offerings give companies fast market access when market conditions become optimal for them in the future. For example, if an issuer is a real estate development company and the housing market is heading toward a decline, it may not be ideal timing to offer additional securities to the market. Once real estate conditions improve, however, the company can use the shelf registration statement it filed earlier to quickly offer the previously registered securities to the market for sale.

How the Shelf Registration Process Works

The shelf registration discloses the classes of registered securities for a potential future offering, such as common shares, preferred shares, debt securities, and warrants. It involves a base prospectus and a prospectus supplement.

Shelf Registration SEC
Shelf Registration SEC

Limitations on Use of Shelf Registration

Shelf offerings are only available to certain qualifying issuers. In order to qualify, a company must have been a public company for at least 12 months. It also cannot have defaulted on loans or failed to pay dividends since the end of the previous year.

Ryan Carpenter serves as Attorney and Managing Director of Carpenter Wellington. Ryan advises clients across a broad set of corporate and commercial matters.