On the Road to Recovery: “At-the-Market”

Introduction

While the capital markets have started to recover in the last few quarters, they remain volatile. Issuers are still somewhat hesitant to commit to traditional, fully marketed follow-on public offerings due to concerns about whether the offering will price in a favorable range or a given offering size is realistic or achievable, as well as concerns relating to the negative implications of downsizing or terminating a public offering after it is announced. Even where a traditional, fully marketed follow on offering is a realistic possibility, many issuers find that “at-the-market” (“ATM”) equity offerings are a useful supplement to traditional offerings, as they offer the ability to raise capital quickly at favorable market prices, while providing some protection from arbitrage opportunities and avoiding pronounced disruptions in trading. While some alternative public offering structures (such as registered direct offerings) are more commonly used for smaller offerings or associated with specific industry sectors, over the past year issuers of varying sizes in a range of industries (including energy, real estate, life sciences, banking, mining and resources, technology and transportation) have successfully raised significant amounts of capital using ATM offerings. This advisory summarizes some characteristics of ATM offerings, as well as certain legal and practical developments since January 2009, when we previously published a client advisory on ATM (as well as registered direct) offerings. Since January 2009, over 60 issuers, including Citi and Ford Motor Company, have entered into ATM programs.