Shelf Registration

Posted in Finance, Accounting and Economics Terms, Total Reads: 296
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Definition: Shelf Registration

A regulation that an organization can evoke to comply with Securities exchange commission of US for new stock offering without actually coming out with public offering upto 3 years. However, the corporation must still file the necessary annual and quarterly reports with the SEC.

 

In terms of SEC protocols, it was officially known as SEC Rule 415 initially. At times current market conditions are not promising for a specific firm to issue a public offering.


For example, suppose the housing market is growing toward an intense decline. In this case, it may not be a correct time for a home builder to come out with its second offering, as many investors will have negative impression about companies which are part of that sector. By using shelf registration, the firm can complete all registration-related procedures beforehand and go to market quickly when conditions become more advantageous and favorable with a minimum of administrative preparation and expense.

 

For example, a company can apply a shelf registration statement with an ambition for

 

1. $2,000,000,000 face value of bonds

2. 200,000,000 shares

3. $1000, 000,000 face value of convertible bonds

4. 100,000,000 Series A warrants

5. 100,000,000 Series B warrants

 

These five different classes or series of securities are presented in a single document. The company can make 3 offers –

 

1. To sell all of them

2. To sell none of them

3. To sell any part of some class

 

Before any offering actually made, the company must file a comparatively short statement stating material changes in its finances and business since the shelf prospectus was documented.

 

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