At-the-market offering

An at-the-market (ATM) offering is a type of follow-on offering of stock utilized by publicly traded companies in order to raise capital over time. In an ATM offering, exchange-listed companies incrementally sell newly issued shares into the secondary trading market through a designated broker-dealer at prevailing market prices.^[1] The broker-dealer sells the issuing company's shares in the open market and receives cash proceeds from the transaction. The broker-dealer then delivers the proceeds to the issuing company where the cash can be used for a variety of reasons. A higher stock price means a greater amount of money can be raised. The issuing company is able to raise this kind of capital on an as-needed basis^[2] with the option to refrain from offering shares if the available prices on a particular day are unsatisfactory. ATM offerings can be started and stopped at any point, and they can also become more aggressive by selling more shares and raising more money when there is an opportunity in the market or additional need by the issuing company. ATMs can be positioned in advance of an upcoming liquidity event or major milestone to take advantage of increased liquidity and a rising stock price.^[3]

Advantages & Disadvantages

ATM financing strategies provide control on the timing and amount of capital raised. Compared to a traditional underwritten offering of a fixed number of shares at a fixed price all at once, ATM financing can be ideal for raising general working capital, funding specific projects, funding R&D, and paying off debt when needed.^[4] An at-the-market offering is generally less expensive and less complicated to execute because there is no need for road shows and other public relations events. However, because of the “dribble out”^[5] nature of ATM offerings, they are a poor choice for a company in dire need of financing or for a company without an actively traded ticker symbol or imminent news releases.

History

The first ATM offerings were completed in the early 1980s for utilities companies looking to raise capital from time-to-time to meet their financial needs. Since then, at-the-market offerings have been used by large and small capitalization issuers in a wide variety of industries with significant growth occurring after the 2008 financial crisis. Although this financing method has become particularly popular with small-cap life sciences issuers, large-capitalization companies such as Bank of America,^[6] Boston Properties and Ford Motor Company have recently employed ATM offerings as well.

References

• http://www.mofo.com/files/Uploads/Images/FAQAtTheMarketOfferings.pdf
• http://blogs.wsj.com/deals/2009/12/04/historys-biggest-bank-capital-raisings-the-list/
• http://www.goodwinprocter.com/Publications/Newsletters/REIT-Alert/2008/1229_At-the-Market-Offerings-Raising-Equity-Capital-in-Volative-Markets.aspx
• http://www.bassberry.com/files/Publication/478fa689-e31d-45a5-8726-023feb96ddac/Presentation/PublicationAttachment/077521e4-0c02-4715-8a98-0507fc9e1c77/C%26S%20Alert%20-%20August%2031,%202009.pdf
• http://capitalmarketalerts.com/equity-series/atm-at-the-market-offering/
• http://medcitynews.com/2011/08/at-the-market-offering-for-biotech-funding-review-4-quick-perspectives/

Corporate finance and investment banking Capital structure Convertible debt Exchangeable debt Mezzanine debt Pari passu Preferred equity Second lien debt Senior debt Senior secured debt Shareholder loan Stock Subordinated debt Warrant Transactions (terms / conditions) Equity offerings At-the-market offering Book building Bookrunner Corporate spin-off Equity carve-out Follow-on offering Greenshoe Reverse Initial public offering Private placement Public offering Rights issue Seasoned equity offering Secondary market offering Underwriting Mergers and acquisitions Buy side Control premium Demerger Divestment Drag-along right Management due diligence Pitch book Pre-emption right Proxy fight Sell side Shareholder rights plan Special situation Squeeze out Staggered board of directors Super-majority amendment Tag-along right Takeover Reverse Tender offer Leverage Debt restructuring Debtor-in-possession financing Financial sponsor Leveraged buyout Leveraged recapitalization High-yield debt Private equity Project finance Valuation Accretion/dilution analysis Adjusted present value Associate company Business valuation Cost of capital Weighted average Discounted cash flow Economic Value Added Enterprise value Fairness opinion Financial modeling Free cash flow Market value added Minority interest Modigliani–Miller theorem Net present value Pure play Real options Residual income Stock valuation Tax shield Terminal value Valuation using multiples List of investment banks Outline of finance