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On March 19, 2026, the SEC’s Division of Corporation Finance issued a new Corporate Finance Interpretation (CFI) that resolves prior ambiguity and confirms flexibility for certain issuers conducting at-the-market (ATM) equity offerings on Form S-3.
Issuers with a public float of $75 million or more can use a primary shelf registration statement pursuant to General Instruction I.B.1 of Form S-3 without limitation on the amount of securities that can be sold. Under the “baby shelf” restrictions contained in General Instruction I.B.6 of Form S-3, an issuer with a public float of less than $75 million is restricted from selling more than one-third of its public float during a 12-month period. CFI Question 116.26 addresses situations where an issuer had filed a prospectus supplement in connection with an ATM program on Form S-3 filed pursuant to General Instruction I.B.1, and subsequently no longer meets the $75 million public float requirement at the time of its next Section 10(a)(3) update (which typically corresponds with the issuer’s Form 10-K filing) and becomes subject to the baby shelf restrictions.
CFI Question 116.26 clarifies that an issuer can continue to offer and sell up to the full amount of shares included in its existing ATM program that the issuer had reasonably expected to offer and sell, even if the issuer’s public float subsequently drops below $75 million. In other words, the issuer should maintain access to the full ATM program capacity covered by the prospectus supplement filed before its eligibility status changed. However, once an issuer becomes subject to the baby shelf rules, any new offerings requiring a new prospectus supplement filed after the Section 10(a)(3) update would be subject to the baby shelf limitations.
The full text of CFI Question 116.26 is included below.
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]
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