Form S-3 Registration For NASDAQ, NYSE and OTC Markets Public Companies

Registration Statements on Form S-3 is a short form registration statement under the Securities Act of 1933, as amended (the “Securities Act”), which may be used by NASDAQ, NYSE and OTC Markets public companies for follow-on offerings and public resales of a company’s securities by selling shareholders. Form S-3 is commonly used a year after the completion of their going public transaction.

Securities registration on Form S-3 is only available to issuers and offerings that meet certain eligibility requirements. For public companies who meet the requirements, Form S-3 registration statements provide a time and cost-effective method of registering public resales of a company’s securities by selling shareholders. Form S-3 shelf registration statements are automatically effective upon filing and are not subject to SEC review and comment, allowing an offering to commence immediately after the Form S-3 registration statement and prospectus supplement is filed with the SEC.

Form S-3 Public Company Requirements

• Public companies may only register a securities offering on Form S-3 if it is subject to SEC reporting requirements – that is an issuer that has been required to report under the Securities Exchange Act of 1934 (the “Securities Exchange Act”) for at least 12 calendar months after effectiveness of its initial registration statement under the Securities Act such as Form S-1 or Form S-4 or a registration statement under the Securities Exchange Act such as Form 10;
• In addition to being subject to SEC reporting requirements, the public company must have timely filed all required Securities Exchange Act reports and information during the previous 12 months and any portion of the month in which the Form S-3 is filed with the SEC; and
• Lastly, since the end of the fiscal year covered by the public company’s most recent Form 10-K annual report, it must not have failed to pay any dividend or sinking fund installment on preferred stock or defaulted on debt or a long-term lease that is material to the public company’s financial condition.

Form S-3 Securities Offering Requirements. 

Companies that meet the above requirements may register a securities offering on Form S-3 only for the following transactions:

Securities Offerings by Public Companies with a Minimum Public Float

A public company on NASDAQ, NYSE or OTC Markets with a public float of at least $75 million may register a primary or secondary offering on behalf of selling shareholders of debt or equity securities for cash on a Form S-3 registration statement. Public Float is the aggregate market value of the voting and non-voting common equity securities held by nonaffiliates of the public company. It is determined by the closing price or average of the bid and ask price of the public company’s securities on its principal trading market as of any date it selects within the 60 days before the filing of the registration statement on Form S-3. There is no limit on the amount of securities offered for a primary offering of common stock on Form S-3 that meets the minimum public float requirements.

Securities Offerings for Public Companies With a Public Float of Less Than $75 Million

A public company on NASDAQ, NYSE or OTC Markets without a public float of at least $75 million may still use Form S-3 to register a secondary offering on behalf of selling shareholders only if the class of securities offered is listed on NYSE or NASDAQ (but not the OTC Markets) or to register a primary offering of nonconvertible securities, other than common equity, if the company is a wholly-owned subsidiary of a WKSI or if the public company as of a date within 60 days prior to filing the registration statement has:

• Issued at least $1 billion of nonconvertible securities in an aggregate principal amount other than common equity in registered primary offerings for cash in the past three years; or
• Outstanding at least $750 million of nonconvertible securities other than common equity in an aggregate principal amount that was issued in registered primary offerings for cash;

• Securities to be offered upon the exercise of outstanding rights under a dividend or interest reinvestment plan or upon the conversion or exercise of outstanding convertible securities, including options and warrants; and
• Primary offerings of securities for cash by a company that is not a shell company listed on NYSE or NASDAQ so long as the aggregate value of securities sold by the issuer during any 12-month period, including the potential offering on Form S-3 does not exceed one-third of the company’s public float.

Registration on Form S-3 by Small Public Companies

A public company without a $75 million public float can offer and sell a limited amount of securities for cash using a Form S-3 registration statement. The securities offered pursuant to the Form S-3 may not exceed one-third of the company’s public float during any 12-month period. The amount of the proposed securities offering on Form S-3 plus the amount of other securities sold by the public company in the last 12 months in offerings registered on Form S-3 must not exceed one-third of the company’s public float as of a date within 60 days of the proposed offering. A small public company is required to provide an updated amount of securities being offered and public float calculation in the Form S-3 prospectus, including the securities in the intended sale, in the 12-month period ending on the date of the prospectus.

Public companies on the OTC Markets and current or certain former shell companies in the previous 12 months are not eligible to rely upon these reduced Form S-3 eligibility requirements. Only small public companies that have a class of common equity securities listed on the NYSE or Nasdaq may take advantage of these forgiving Form S-3 requirements. 

Well-Known Seasoned Issuers (“WKSI”)

To use Form S-3, Well-Known Seasoned Issuers (“WKSI”) are required to:

• Meet the public company eligibility requirements to register securities on Form S-3, including having timely filing all required reports and information required under the Securities Exchange Act during the prior 12 months;
• Within 60 days of qualification as a WKSI, have either $700 million of public float or have issued an aggregate $1 billion of nonconvertible securities, other than common equity, in registered primary securities offerings for cash such as on Form S-1, during the previous three years;
• Not be an ineligible issuer, which includes, among other things, shell companies, blank check companies, penny stock issuers, SEC reporting companies that are not current in filing their reports under the Securities Exchange Act, and companies that have been the subject of SEC Actions, refusal or SEC stop orders, or found to have violated the antifraud provisions of the federal securities laws during the previous three years or public companies in bankruptcy; and

• Not be an SEC-registered investment company or an asset-backed issuer.

Unlike other public companies using Form S-3, a WKSI public company does not have to include the amount of securities to be offered, allocation of the registered securities between primary and secondary securities; description of the securities (other than the name or class of securities); or an outline of the plan of distribution. The issuer can offer and sell an unlimited amount of securities included in its shelf registration statement and provide the information not included in the prospectus in a prospectus supplement used at the time of the offering. The issuer has the option of including the information on a Current Report on Form 8-K, which would be automatically incorporated by reference into the Form S-3 registration statement.

A WKSI’s ability to use a Form S-3 shelf registration statement depends on the criteria used to determine status as a WKSI:

• A public company that qualifies as a WKSI based on its public float of $700 million or more is eligible to register an offering for any kind of security on an automatically effective shelf registration statement using Form S-3.

• A public company that qualifies as a WKSI based on the aggregate value of sales of its nonconvertible securities other than common equity in registered offerings of $1 billion or more for cash during the three prior 3 years may use Form S-3 as an automatically effective shelf registration statement to register nonconvertible securities other than common equity. If the value of the public company’s common equity held by nonaffiliates of the issuer is at least $75 million, it can also register any other securities using Form S-3 as an automatically effective shelf registration statement.

A public company’s status as a WKSI is generally determined at the time of the initial filing of the Form S-3 registration statement and any amendment to the registration statement and at the time of it files its annual report on Form 10-K. If a public company failed to meet the public float requirement at any time within the 60-day period of a later-filed Form 10-K, even if it qualified as a WKSI at the time of its initial filing of an automatic registration statement, it could lose its WKSI status before the end of the customary three-year period for the automatic shelf registration statement. 

To speak with a Securities Attorney, please contact Brenda Hamilton at 200 E Palmetto Rd, Suite 103, Boca Raton, Florida, (561) 416-8956, or by email at [email protected]. This securities law blog post is provided as a general informational service to clients and friends of Hamilton & Associates Law Group and should not be construed as and does not constitute legal advice on any specific matter, nor does this message create an attorney-client relationship. Please note that the prior results discussed herein do not guarantee similar outcomes.

Hamilton & Associates | Securities Attorneys
Brenda Hamilton, Securities Attorney
200 E Palmetto Rd, Suite 103
Boca Raton, Florida 33432
Telephone: (561) 416-8956
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www.SecuritiesLawyer101.com