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Registered direct offering (RDO)
Also called: registered direct, RD offering
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.
Explanation
A placement agent quietly approaches a handful of funds and agrees a price, usually below the last close. The company then sells them shares off its effective shelf by filing a prospectus supplement (424B5). The deal is typically announced before the market opens and closes one or two trading days later.
Because the shares are registered, buyers can sell them right away, unlike shares bought in a PIPE. Small-cap RDOs often come with warrants sold in a concurrent private placement, which gives investors extra upside and adds to the overhang.
For the company, an RDO is fast and certain. For holders, the discount, the warrants and the speed usually mean a sharp drop on the announcement, and the new holders often sell into any bounce.
Why it matters
RDOs are one of the most common ways cash-short small caps raise money, and they arrive without warning: often the first sign is the morning press release. Under the baby-shelf rule, their size is capped at the company’s remaining one-third capacity.
How Equity Dictionary measures it
Registered directs are identified from the prospectus supplement and counted as equity raises in the financing-activity factor; the 8-K, prospectus and any Form D filed within 15 days count as one deal. Proceeds and price are parsed where stated, and money raised after the latest balance sheet is added to estimated cash today.
Related terms
- 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.
- 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.
- 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.
- 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.
- 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.
Plain-English summary for research; not legal or investment advice.