Dictionary

Plain-English definitions of 43 equity research and small-cap terms, from ATM offerings and the baby-shelf rule to going concern, linked to live SEC data.

Dilution & financing

At-the-market offering (ATM): A program that lets a company sell new shares a little at a time directly into the market at prevailing prices, through a broker acting as its sales agent.
Baby-shelf rule: The Form S-3 limit that lets a company with less than $75 million of public float sell no more than one-third of that float through its shelf in any 12 months.
Convertible notes: Debt that the holder can exchange for shares at a set conversion price, so a loan today can become dilution later.
Dilution: The shrinking of each existing shareholder’s ownership stake when a company issues new shares.
Equity line of credit (ELOC): A facility in which an investor commits to buy up to a set amount of a company’s new shares over time, at the company’s request, at a discount to recent prices.
Follow-on offering: A sale of new shares by a company that is already public, usually through underwriters or a placement agent and priced at a discount to the market.
Overhang: Shares that could be added to the market from warrants, options, convertibles and unvested stock awards, which tends to weigh on the share price.
Pre-funded warrants: Warrants sold for almost the full share price up front, leaving a nominal exercise price such as $0.0001, used in place of shares for buyers near an ownership limit.
Private investment in public equity (PIPE): A sale of unregistered stock, convertibles or warrants by a public company directly to selected investors, who usually get the shares registered for resale afterwards.
Registered direct offering (RDO): A sale of registered shares negotiated directly with a few institutional investors through a placement agent, usually at a discount and closed within a day or two.
Regulation D and Form D: The SEC rules that let companies sell securities privately without registering them, and the short notice (Form D) they file after the first sale.
Shelf registration: A registration statement, usually on Form S-3 or F-3, that pre-registers securities so a company can sell them later without a new SEC review each time.
Toxic financing: Convertible securities whose conversion price floats with the market, so the lower the stock falls, the more shares the holder receives.
Warrants: Contracts issued by a company that let the holder buy new shares at a fixed exercise price until an expiry date, often five years out.

Filings & forms

Form 4: The filing in which a company’s officers, directors and 10%-plus shareholders report their trades in its stock, due within two business days.
Form 8-K: The current report a company must file within four business days of a major event, organized into numbered items.
Form 10-K and 10-Q: The annual (10-K) and quarterly (10-Q) reports US public companies file with the SEC, containing their financial statements and management’s discussion.
Form 20-F and 6-K: The annual report (20-F) and current reports (6-K) that foreign private issuers listed in the US file in place of the 10-K, 10-Q and 8-K.
Form S-1: The full-length SEC registration statement used for IPOs and by companies that cannot use a shelf, including to register shares for resale.
Prospectus supplement (424B5): The document a company files under Rule 424(b) to describe a specific offering; Form 424B5 is the usual filing for a stock sale off a shelf.
Schedule 13D and 13G: The reports anyone who acquires more than 5% of a company’s voting stock must file: 13D for activists and would-be controllers, the shorter 13G for passive investors.
SIC code: The four-digit Standard Industrial Classification code the SEC assigns to each registrant to describe its main line of business.
XBRL: The machine-readable tags SEC filers attach to every number in their financial statements, so software can read financials without parsing documents.

Fundamentals & quality

Authorized shares: The maximum number of shares a company’s charter allows it to issue; issuing more requires shareholders to approve a charter amendment.
Burn rate: How fast a company uses up cash, usually measured as operating cash outflow per quarter or per month.
Free cash flow (FCF): Operating cash flow minus capital expenditures: the cash a business generates, or consumes, after paying to maintain and grow its assets.
Market cap vs. enterprise value: Market cap is the stock market value of a company’s shares; enterprise value adds debt and subtracts cash to value the business itself.
Piotroski F-score: A 0–9 score of financial health built from nine pass/fail tests of profitability, balance-sheet strength and efficiency, comparing the last two fiscal years.
Public float: The market value of shares held by non-affiliates, meaning everyone except officers, directors and controlling holders: the SEC’s yardstick for company size.
Trailing twelve months (TTM): The sum of the last four reported quarters, giving an annual figure that updates every quarter instead of once a year.
Up-C structure: A setup in which the listed company is a holding company owning part of an operating partnership, while pre-IPO owners keep the rest as units they can swap for public shares.

Market & trading

Days to cover: Short interest divided by average daily trading volume: roughly how many days it would take short sellers to buy back their shares.
Fails to deliver (FTD): Shares that a seller did not deliver to the buyer by the settlement date, which the SEC publishes twice a month.
Rule 10b5-1 plan: A written plan, set up in advance, that schedules an insider’s trades in company stock and shields trades made under it from insider-trading claims.
Short interest: The number of a company’s shares that have been sold short and not yet bought back, usually shown as a percentage of the float.
Special purpose acquisition company (SPAC): A shell company that raises money in an IPO, holds it in trust and has a limited time to merge with a private business, taking it public.

Risk & distress

Altman Z-score: A formula that combines balance-sheet and income ratios to estimate how close a company is to financial distress.
Cash runway: How many months a company can keep operating on the cash it has, at its current burn rate, before it must raise more.
Delisting notice (8-K Item 3.01): An 8-K under Item 3.01, filed within four business days when a company learns it no longer meets an exchange’s listing rules, faces delisting or is moving its listing.
Dilution-risk score: Equity Dictionary’s 0–100 estimate of how much pressure a company is under to issue new stock, built from eight weighted factors.
Going concern: An accounting warning that a company may not be able to keep operating and paying its bills over the next year without raising money or restructuring.
Minimum bid price deficiency: The notice an exchange sends when a stock has closed below $1.00 for 30 consecutive business days, starting a deadline to get back above it.
Reverse stock split: Combining existing shares into fewer, higher-priced ones, for example 1-for-10, usually to lift the share price back above an exchange minimum.