Shelf Registration Statements in Going Public Transactions
A shelf registration statement allows an issuer to register a public offering even when there is no present intention to sell all the securities being registered. Shelf registrations are often used in going public transactions by issuers registering securities on Form S-1.
Private companies seeking public company status can use a Form S-1 shelf registration to register multiple securities offerings at the same time on a single registration statement. In going public transactions, often issuers sell shares in reliance upon Rule 506 of Regulation D to raise seed capital, and then register those shares by filing an S-1.
Rule 506 offerings are often used to obtain the
number of shareholders—25 or more—required by the Financial Industry Regulatory Authority (“FINRA”) for a ticker symbol assignment.
Shares sold by private companies in Rule 506 offerings must be held at least 12 months prior to resale unless registered on Form S-1 or other SEC registration statement. This makes the shelf registration statement particularly appealing in going public transactions, because the issuer can register shares held by selling shareholders as well as new shares it intends to sell in an initial public offering (“IPO”) or direct public offering (“DPO”).
In a continuous offering the issuer begins to offer its securities immediately after its Form S-1 registration statement is declared effective by the SEC. The securities will be offered until the issuer close its offering. In a delayed offering on Form S-1, the issuer does not intend to immediately sell all of the securities when the registration statement is deemed effective. Only issuers that are primarily eligible to use Form S-3—Large Accelerated Filers Well Known Seasoned Issuers, or WKSIs—may sell on a delayed basis or conduct an at-the-market offering. Any issuer may engage in any other type of shelf offering.
With an effective shelf registration statement, the issuer takes the shares “off the shelf” when it is ready to offer them. Shelf registration statements provide tremendous flexibility in going public transactions by allowing issuers to choose from various structures while registering securities for sale continuously, delayed or immediately. Using a shelf registration statement in a going public transaction provides the issuer with flexibility in its offering structure and also with the means to quickly gain access to the public markets.
For smaller companies, shelf registrations are particularly attractive because they save the issuer time and money. Only one registration statement need be prepared, which reduces legal expenses and eliminates the need to wait for the SEC to deem additional S-1′s effective when the company decides to launch successive offerings.