At-the-market offering

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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 or shares they already own into the secondary trading market through a designated broker-dealer at prevailing market prices. 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 purposes. 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 [1] 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.

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Advantages & Disadvantages

ATM financing strategies provide control on the timing and amount of capital raised. This allows companies to raise capital on the terms that they choose, including when and if the ATM is utilised. This allows companies to opportunistically take advantage of increases in the share price and means that companies do not have to time the capital raise perfectly, in effect "averaging in" to their own share price. If successful, it can be a blessing for raising general working capital, funding specific projects, funding R&D, and helping to manage the balance sheet (e.g. paying off debt when needed). [2] Because of the “dribble out” [3] nature of ATM offerings and the uncertainty of how much will be raised (for example if the target minimum price is set too high by the company), they are not as useful 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, [4] Boston Properties and Ford Motor Company have recently employed ATM offerings as well.

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Stock exchange Organization that provides services for stock brokers and traders to trade securities

A stock exchange, securities exchange, or bourse, is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds, and other financial instruments. Stock exchanges may also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividends. Securities traded on a stock exchange include stock issued by listed companies, unit trusts, derivatives, pooled investment products and bonds. Stock exchanges often function as "continuous auction" markets with buyers and sellers consummating transactions via open outcry at a central location such as the floor of the exchange or by using an electronic trading platform.

Capital market Finance

A capital market is a financial market in which long-term debt or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold. Capital markets channel the wealth of savers to those who can put it to long-term productive use, such as companies or governments making long-term investments. Financial regulators like Securities and Exchange Board of India (SEBI), Bank of England (BoE) and the U.S. Securities and Exchange Commission (SEC) oversee capital markets to protect investors against fraud, among other duties.

The primary market is the part of the capital market that deals with the issuance and sale of equity-backed securities to investors directly by the issuer. Investors buy securities that were not previously traded. Primary markets create long term instruments through which corporate entities raise funds from the capital market. It is also known as the New Issue Market (NIM).

Financial market Generic term for all markets in which trading takes place with capital

A financial market is a market in which people trade financial securities and derivatives at low transaction costs. Some of the securities include stocks and bonds, raw materials and precious metals, which are known in the financial markets as commodities.

Security (finance) Tradable financial asset

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The secondary market, also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. Another frequent usage of "secondary market" is to refer to loans which are sold by a mortgage bank to investors such as Fannie Mae and Freddie Mac.

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Rights issue

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A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFC facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawn shops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations. Alan Greenspan has identified the role of NBFIs in strengthening an economy, as they provide "multiple alternatives to transform an economy's savings into capital investment which act as backup facilities should the primary form of intermediation fail."

Stock Shares into which ownership of the corporation is divided

In finance, stock consists of all of the shares into which ownership of a corporation or company is divided. A single share of the stock means fractional ownership of the corporation in proportion to the total number of shares. This typically entitles the shareholder (stockholder) to that fraction of the company's earnings, proceeds from liquidation of assets, or voting power, often dividing these up in proportion to the amount of money each stockholder has invested. Not all stock is necessarily equal, as certain classes of stock may be issued for example without voting rights, with enhanced voting rights, or with a certain priority to receive profits or liquidation proceeds before or after other classes of shareholders.

Securities market participants (United States)

Securities market participants in the United States include corporations and governments issuing securities, persons and corporations buying and selling a security, the broker-dealers and exchanges which facilitate such trading, banks which safe keep assets, and regulators who monitor the markets' activities. Investors buy and sell through broker-dealers and have their assets retained by either their executing broker-dealer, a custodian bank or a prime broker. These transactions take place in the environment of equity and equity options exchanges, regulated by the U.S. Securities and Exchange Commission (SEC), or derivative exchanges, regulated by the Commodity Futures Trading Commission (CFTC). For transactions involving stocks and bonds, transfer agents assure that the ownership in each transaction is properly assigned to and held on behalf of each investor.

References

  1. ↑ Goodwin Proctor LLP. "At The Market Offerings: Raising Equity Capital in Volatile Markets" Archived May 1, 2015, at the Wayback Machine , 2012. Retrieved on 10 December 2012.
  2. ↑ MedCity News. "At-the-market Offerings for Biotech Funding? Review 4 Quick Perspectives", 2012. Retrieved on 10 December 2012.
  3. ↑ McCarthy, Dennis. "ATM – At the Market Offering", 2012. Retrieved on 10 December 2012.
  4. ↑ Grocer, Stephen. "The Biggest Bank Capital Raisings: The List", The Wall Street Journal , New York, 4 December 2009. Retrieved on 13 November 2012.



  1. ↑ Debt restructuring
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