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Baby-shelf rule
Also called: baby shelf, General Instruction I.B.6, I.B.6, one-third 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.
Explanation
Form S-3 General Instruction I.B.6 opens shelf registration to smaller companies, with a cap: when public float is under $75 million, securities sold under I.B.6 in any rolling 12 months, including the sale being made, can total at most one-third of public float. Float may be measured with a price from any date within 60 days before the sale, so companies usually pick the highest recent close.
Only companies with a class of common stock listed on a national exchange qualify, and not shell companies or companies that were shells in the last 12 months. Form F-3 has an equivalent limit for foreign private issuers. If float later reaches $75 million, the cap stops applying to further sales under the shelf.
Example: 20 million non-affiliate shares at $2.50 is a $50 million float, so the company can sell about $16.7 million of stock off its shelf over 12 months, minus whatever it already sold in that window. Sales outside the shelf, such as PIPEs or an S-1 offering, do not count against the cap, which is one reason capped companies use them.
Why it matters
The cap limits how much an ATM or registered direct can raise, so a capped company with a short runway often turns to a more expensive deal: an S-1 offering with warrants, a PIPE or an equity line. A rising share price lifts the cap, one reason small caps tend to raise money right after rallies.
How Equity Dictionary measures it
The screener flags every company with a public float under $75 million (its Baby-shelf preset). On a company page, the shelf panel shows public float and the one-third capacity. Float there is float shares × price when those agree with the share count, else market cap × (1 − insider ownership), else the dei:EntityPublicFloat value from the 10-K cover.
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.
- 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.
- 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.
- 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.
- 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.
Plain-English summary for research; not legal or investment advice.