An at-the-market (ATM) offering is a type of

follow-on offering A follow-on offering, also known as a follow-on public offering (FPO), is a type of public offering of stock that occurs subsequent to the company's initial public offering (IPO). A follow-on offering can be categorised as dilutive or non-dilu ...

of stock utilized by publicly traded companies in order to raise capital over time. In an ATM offering, exchange-listed companies incrementally sell newly issued shares or shares they already own into the secondary trading market through a designated broker-dealer at prevailing

market prices A price is the (usually not negative) quantity of payment or compensation given by one party to another in return for goods or services. In some situations, the price of production has a different name. If the product is a "good" in the ...

. The broker-dealer sells the issuing company's shares in the open market and receives cash proceeds from the transaction. The broker-dealer then delivers the proceeds to the issuing company where the cash can be used for a variety of purposes. A higher stock price means a greater amount of money can be raised. The issuing company is able to raise this kind of capital on an as-needed basis with the option to refrain from offering shares if the available prices on a particular day are unsatisfactory. ATM offerings can be started and stopped at any point, and they can also become more aggressive by selling more shares and raising more money when there is an opportunity in the market or additional need by the issuing company. ATMs can be positioned in advance of an upcoming

liquidity Liquidity is a concept in economics involving the convertibility of assets and obligations. It can include: * Market liquidity, the ease with which an asset can be sold * Accounting liquidity, the ability to meet cash obligations when due * Liq ...

event Event may refer to: Gatherings of people * Ceremony, an event of ritual significance, performed on a special occasion * Convention (meeting), a gathering of individuals engaged in some common interest * Event management, the organization of e ...

or major

milestone A milestone is a numbered marker placed on a route such as a road, railway line, canal or boundary. They can indicate the distance to towns, cities, and other places or landmarks; or they can give their position on the route relative to so ...

to take advantage of increased liquidity and a rising stock price.

Advantages & Disadvantages

ATM financing strategies provide control on the timing and amount of capital raised. This allows companies to raise capital on the terms that they choose, including when and if the ATM is utilised. This allows companies to opportunistically take advantage of increases in the share price and means that companies do not have to time the capital raise perfectly, in effect "averaging in" to their own share price. If successful, it can be a blessing for raising general working capital, funding specific projects, funding R&D, and helping to manage the balance sheet (e.g. paying off

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

when needed). Because of the “dribble out” nature of ATM offerings and the uncertainty of how much will be raised (for example if the target minimum price is set too high by the company), they are not as useful for a company in dire need of financing or for a company without an actively traded

ticker symbol A ticker symbol or stock symbol is an abbreviation used to uniquely identify publicly traded shares of a particular stock on a particular stock market. In short, ticker symbols are arrangements of symbols or characters (generally Latin letters ...

or imminent news releases.

History

The first ATM offerings were completed in the early 1980s for

utilities A public utility company (usually just utility) is an organization that maintains the infrastructure for a public service (often also providing a service using that infrastructure). Public utilities are subject to forms of public control and ...

companies looking to raise capital from time-to-time to meet their financial needs. Since then, at-the-market offerings have been used by large and small

capitalization Capitalization (American English) or capitalisation (British English) is writing a word with its first letter as a capital letter (uppercase letter) and the remaining letters in lower case, in writing systems with a case distinction. The term ...

issuers in a wide variety of industries with significant growth occurring after the 2008 financial crisis. Although this financing method has become particularly popular with small-cap life sciences issuers, large-capitalization companies such as

Bank of America The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank ...

Boston Properties Boston Properties, Inc. is a publicly traded real estate investment trust that invests in premier workplaces in Boston, Los Angeles, New York City, San Francisco, Seattle, and Washington, D.C. As of June 30, 2022, the company owned or had interest ...

and

Ford Motor Company Ford Motor Company (commonly known as Ford) is an American multinational automobile manufacturer headquartered in Dearborn, Michigan, United States. It was founded by Henry Ford and incorporated on June 16, 1903. The company sells automobi ...

have recently employed ATM offerings as well.

References

*https://hklegal.hk/%e5%82%b5%e5%8b%99%e9%87%8d%e7%b5%84-iva%e7%94%b3%e8%ab%8b%e7%a8%8b%e5%ba%8f/ Debt restructuring *https://blogs.wsj.com/deals/2009/12/04/historys-biggest-bank-capital-raisings-the-list/ *https://web.archive.org/web/20150501065542/http://www.goodwinprocter.com/Publications/Newsletters/REIT-Alert/2008/1229_At-the-Market-Offerings-Raising-Equity-Capital-in-Volative-Markets.aspx *http://www.bassberry.com/files/Publication/478fa689-e31d-45a5-8726-023feb96ddac/Presentation/PublicationAttachment/077521e4-0c02-4715-8a98-0507fc9e1c77/C%26S%20Alert%20-%20August%2031,%202009.pdf *http://capitalmarketalerts.com/equity-series/atm-at-the-market-offering/ *http://medcitynews.com/2011/08/at-the-market-offering-for-biotech-funding-review-4-quick-perspectives/ {{corporate finance and investment banking Corporate finance