New rules permit use of Forms S-3 and F-3 for primary offerings by issuers with less than $75 million in public float, subject to the limitation that no more than one-third of public float in 12 months may be issued in such offerings.

In an effort to enable more domestic issuers and foreign private issuers to conduct primary securities offerings using Forms S-3 and F-3, respectively, and thereby facilitate the capitalraising activities of smaller public companies, the Securities and Exchange Commission (SEC) has recently expanded the eligibility conditions for the use of Forms S-3 and F-3 to register primary offerings. Prior to the SEC’s amendments, companies were able to register primary offerings of their securities on Forms S-3 and F-3 only if the value of their equity held by non-affiliates, or “public float,” was $75 million or more (calculated within 60 days prior to the date on which the registration statement or a post-effective amendment to the registration statement, such as an annual report on Form 10-K or 20-F, was filed). The revisions that have been adopted by the SEC now allow companies with less than $75 million in public float to register primary offerings of their securities on Forms S-3 and F-3, provided that certain other conditions are met, including that such issuers do not sell securities valued in excess of one-third of their public float in primary offerings using Forms S-3 or F-3 over any period of 12 calendar months.

In the Adopting Release for these rules, the SEC noted that “[t]hese amendments are intended to allow a larger number of public companies to benefit from the greater flexibility and efficiency in accessing the public securities markets afforded by Form S-3 and Form F-3 in a manner that is consistent with investor protection.”1 The “greater flexibility and efficiency” referred to by the SEC stems from the following factors:

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