On March 19, 2026, the Securities and Exmodify Commission’s (“SEC”) Division of Corporation Finance issued a new Corporation Finance Interpretation (or “CFI,” formerly referred to as “Compliance and Disclosure Interpretations” or “C&DIs”) on at-the-market offerings (“ATM Programs”) and baby shelf eligibility.
Question 116.26
Question: A company entered into a sales agreement with a named selling agent for an at-the-market offering of an amount of securities that the company reasonably expected to offer and sell. The company had an effective Form S-3 registration statement, was eligible to offer and sell securities in reliance on General Instruction I.B.1, and filed a prospectus supplement for the offering. At the time of its next Section 10(a)(3) update, the company does not meet the $75 million public float requirement of Instruction I.B.1 but remains eligible to utilize Form S-3 in reliance on General Instruction I.B.6 (the “baby shelf”). Will the staff object if the company continues to offer and sell the full amount of securities covered by the prospectus supplement even if that amount would exceed the offering limits of General Instruction I.B.6?
Answer: Under these circumstances, the staff will not object if the company continues offering and selling the full amount of securities covered by the prospectus supplement that was filed prior to the Section 10(a)(3) update.
Background and Practical Significance
Under Form S-3, a company with a public float of $75 million or more may conduct primary offerings of securities in reliance on General Instruction I.B.1, without any cap on the offering amount. Companies with a public float below $75 million may still utilize Form S-3 under General Instruction I.B.6, but are limited to selling securities with a value of no more than one-third of their public float in any 12-month period — a provision referred to as the “baby shelf.”
A company’s eligibility to utilize Form S-3 is reassessed each time it files its Annual Report on Form 10-K, which serves as its Section 10(a)(3) update. The public float is calculated as of a date within 60 days prior to the date of such filing. Becautilize a company typically establishes an ATM Program to raise capital incrementally over an extfinished period of time, a Section 10(a)(3) update can occur well before the company has fully drawn down its ATM Program, raising questions about whether the existing ATM Program would become subject to the baby shelf restrictions if the company’s public float no longer exceeded $75 million.
This new staff interpretation clarifies that the SEC would not object to a company that continued to sell shares under its existing ATM Program, even if the company would otherwise lose its eligibility to offer and sell securities beyond the baby shelf limit, provided the company had established the ATM Program prior to its Section 10(a)(3) update and had filed a prospectus supplement to an effective Form S-3 that covered sales to be created under the ATM Program.
Key Takeaways for Issuers
This interpretation is significant for both tinyer reporting companies and companies experiencing volatility in their stock price with established ATM Programs, as it provides comfort that a company will not be forced to reduce the size of its ongoing ATM Program simply becautilize its public float dips below $75 million at the time it files its annual report. So long as the company was eligible under General Instruction I.B.1 when the prospectus supplement was originally filed, it may continue selling the full amount covered by that prospectus supplement without being subject to the baby shelf’s one-third cap. This interpretation reduces the risk of disruption to an issuer’s ATM Program cautilized by stock price volatility or market conditions that temporarily reduce its public float below the $75 million threshold. Issuers should note that this interpretation reflects the unofficial views of the SEC staff and does not constitute a binding rule, regulation, or Commission statement.
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