ATM stock offering, cool
new one for me. I thought you were using some kind of hip stock lingo, ATM LOL!
What is it? Sometimes called a controlled equity offering, an at-the-market offering or ATM is sometimes a securities offering in which a company’s shares are sold over a period of time. A company can start or stop the sale as needed. Unlike a traditional stock offering where a fixed number of shares are sold at a fixed price all at once, an ATM offering sells shares incrementally at the prevailing market prices. “You’re selling at the market, whatever the market is that day,” explained Alec Donaldson, a securities attorney at Wyrick Robbins in Raleigh, North Carolina.
Requirements. In order for publicly-traded companies to raise money through an ATM, they must have a shelf registration statement filed with securities regulators, Donaldson said. They must also have a public float of at least $75 million. That’s not feasible for companies of all sizes. “There are a lot of small companies that just can’t do that,” Donaldson said.
Advantages. With stock sold over time, ATMs have less of an impact on a company’s stock price, Wyche said. ATMs save companies money because they cost less in fees to underwriters. Also, because the stock sale can be started or stopped when a company chooses, ATMs give companies the flexibility to take advantage of good news and rising stock prices, Donaldson said.
Disadvantages. ATMs probably aren’t the right choice for companies that want to raise a large amount of capital in a short period of time, Wyche said. For that, a traditional stock offering is better. ATMs are also better suited for companies that have a steady, predictable cash burn. Not every biotech fits that description, Wyche said.
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