Shelf registrations

A business employs a shelf registration when it registers a new issuance of securities with the Securities and Exchange Commission (SEC), where the issuance is to be made sometime during the next three years. This approach allows a company to have pre-approved securities available, which it can issue on short notice. A shelf registration is especially useful when issuing debt securities, since the time period during which the market rate of interest is low may be very short.

The SEC's Rule 415 governs shelf registrations. In brief, a shelf registration can be accomplished by filing a Form S-3, though only larger firms qualify to use this approach. A Form S-1 filing can also be employed, though only when the issuer intends to issue the underlying securities on an "immediate, continuous, or delayed basis," with all sale transactions concluded within the next two years.

Normally, a company cannot issue securities related to a shelf registration until the registration has been declared effective by the SEC. However, a shelf registration can be declared effective as soon as it is filed, according to Rule 462(e), but only when the issuer is a well-known seasoned issuer (WKSI). An issuer qualifies as a WKSI if:

  • The market value of its stock owned by non-affiliates is at least $700 million; or
  • The entity has issued at least $1 billion of non-convertible securities during the last three years, other than common equity, for cash

Further, a WKSI has fewer SEC filing requirements imposed upon it.

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