Dictionary › Dilution & financing
At-the-market offering (ATM)
Also called: ATM program, ATM facility, equity distribution agreement, sales agreement
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.
Explanation
The company signs a sales agreement (also called an equity distribution agreement) with one or more brokers and files a prospectus supplement that sets a maximum amount, say “up to $50 million.” From then on it can tell the agent to sell shares on any trading day, at whatever price the market pays, and pause whenever it likes. The agent typically earns 1% to 3% of the gross proceeds.
Rule 415(a)(4) defines an at-the-market offering as one made into an existing trading market at other than a fixed price, and requires it to be registered on a Form S-3 or F-3 shelf. Companies with less than $75 million of public float are also bound by the baby-shelf rule, which caps shelf sales at one-third of float in any 12 months.
There is no announcement each time shares are sold. Investors learn how much was raised from the next 10-Q or 10-K, or from a new supplement that resizes the program, so an ATM can quietly add supply for months.
Why it matters
An ATM is the cheapest and most flexible way for a public company to raise money, which makes it the default for cash-burning small caps. For holders it means steady selling that tends to cap rallies: when the price rises, the company can sell more.
How Equity Dictionary measures it
Prospectus supplements are read for ATM language (“at-the-market”, “sales agreement”, “equity distribution agreement”) in the company’s own deal, and EDGAR full-text search finds ATM filings the parser missed. An ATM in place sets shelf and registration readiness to 80 out of 100, and using one adds 15 points to the financing-activity factor. ATM sales are never added to estimated cash today, because they stay invisible until the next report.
Related terms
- 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.
- 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.
- 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.
- 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.
- Dilution: The shrinking of each existing shareholder’s ownership stake when a company issues new shares.
- 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.
Plain-English summary for research; not legal or investment advice.