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Yesterday, the SEC's Division of Corporation Finance published new Corporation Finance Interpretation (CFI, formerly referred to as Compliance and Disclosure Interpretations, or C&DIs) 116.26, addressing a discrete but practically important question for issuers conducting at-the-market (ATM) offerings on Form S-3:
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 use 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. [March 19, 2026]
The practical significance of this interpretation is considerable for smaller reporting companies and companies experiencing volatility in their stock price that use ATM programs as a capital-raising mechanism. The Section 10(a)(3) update, required under the Securities Act of 1933, as amended, is typically effected through the filing of the issuer's Form 10-K, and the public float is calculated as of a date within 60 days prior to the date of such filing. ATM offerings are inherently continuous and are frequently structured to raise capital incrementally over an extended period, meaning the Section 10(a)(3) update can occur before the program is fully drawn. However, while the CFI provides meaningful protection for offerings already in progress, it does not extend to new prospectus supplements filed after the Section 10(a)(3) update, for which compliance with the baby shelf limits would apply from the outset. Issuers approaching an annual update while midway through an ATM program should carefully document their original reasonable expectation of offering size, a factual predicate that the CFI expressly includes, and ensure their prospectus supplements are filed and on record before the triggering update occurs.
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