What is a shelf registration?
A shelf registration is U.S. practice whereby a firm can register a new share issue up to two years before a public offering. Usually there is no present intention by the company to sell the shares being registered, but the registration enables the issuer to act quickly when market conditions are optimal.
Where have you heard about a shelf registration?
You may have heard about shelf registration as part of the Securities and Exchange Commission (SEC) Rule 415 which permits companies to file a registration for shares they intend to offer in the future. The registration can be used for both primary and secondary offerings, or a combination of both.
What you need to know about a shelf registration.
Once a shelf registration has taken place, the company needs only to file updated quarterly, annual and related reports with the SEC. When market conditions become favourable the corporation takes its securities ‘off the shelf’ and can issue them quickly and with minimum expense. The shelf registration allows the company to circumvent the usual SEC review processes for the prospectus and the terms of the offering. After a ‘shelf takedown’, the securities are offered with a base prospectus – filed with the shelf registration – and a prospectus supplement which contains the specific terms of the new offering.