Shelf Offering - Explained
What is a Shelf Offering?
Written by Jason Gordon
Updated at April 15th, 2022
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Table of Contents
What is a Shelf Offering?How does a Shelf Offering Work? Additional Benefits of Shelf OfferingsAcademic Research on Shelf OfferingsWhat is a Shelf Offering?
A shelf offering is a form of public offering in which a single prospectus covers the offering and selling of securities at different occasions by an issuer. The Securities and Exchange Commission (SEC) provides a shelf offering for registered companies which allows then register an issue of securities but may decide not to sell the issue at a time.
The issuer can spread the sale of the issue over a period of three years without any need to issue separate prospectus. The first prospectus obtained when the initial issue was registered covers sales of the portions of the issue, hence, the issuer need not re-register the securities. A shelf offering is otherwise called a shelf prospectus or shelf registration.
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How does a Shelf Offering Work?
Before an issuer can partake in a shelf offering, such a company must have completed shelf registration with the Securities and Exchange Commission (SEC). Forms S-3, F-3 or F-6 are filed by issuers depending on the types of securities being issued. A shelf offering allows an issue to sell new securities in a primary offering and at the same time resell outstanding securities in a secondary offering.
Issuers who take part in shelf offerings often register for a period of three years to cover all sales and resales. Adequate reports must also be filed with the SEC to disclose the securities a company issue in the offering. A shelf offering comes with specific advantages such as timely access to markets and assurance that an issuer can sell an issue in portions without obtaining another prospectus. Takedown is a term that describes the decision of an issuer to issue securities to the market through a shelf offering.
Additional Benefits of Shelf Offerings
The certainty that issuers have in participating in the market after completing a shelf registration is one of the advantages of a shelf offering. Also, an issuer has a control over the securities being issued in the market but is required to make reports to the SEC to disclose the securities that were issued. A shelf offering is cost-effective, it saves an issuer the cost of re-registering securities being issued.
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