Stock Swings May Spur At-the-Market Offerings After Record High

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By Jacob Rund

At-the-market offerings may be primed for even more growth in 2018, after a record year propelled by ONEOK Inc., BGC Partners Inc., and other companies seeking low-cost capital.

These offerings let companies decide when to issue additional shares at the prevailing market price. Companies listed on U.S. exchanges announced 205 ATM offerings valued at a collective $27.82 billion last year, topping the $23.01 billion value of the 189 offerings in 2016, according to an analysis by Bloomberg Law.

ATMs may be particularly attractive this year because of erratic market conditions. ATM program values spiked to more than $18 billion in 2009, in the wake of the 2008 financial crisis. Announced ATM offerings totaled $323 million in 2008.

ATM offerings work well in most market types, but perform best during two in particular: when volume and prices are up across the board, and during periods of volatility, Dean Colucci, a partner with Duane Morris LLP and a former investment banker, told Bloomberg Law.

“In a highly volatile market, where you can’t do a follow-on deal because prices are jumping around, it becomes the only way of raising capital,” Colucci said.

Much the 2017 growth can be attributed to the flexibility and cost-effectiveness an ATM offering provides compared with other funding alternatives, finance attorneys interviewed by Bloomberg Law said. They also pointed to ATMs’ ability to incrementally generate specific amounts of cash whenever, and however often, the need arises.

“It provides a very efficient way for a company to raise capital,” Colucci said. “It gives control to the issuer. They pick the timing, they pick the amount, and they pick the price.”

Last year’s deal count fell just four short of the record number seen during 2015. However, the value of 2017 ATM offerings is the most in at least a decade, meaning companies are looking to raise more from each one.

ONEOK, a Tulsa, Okla.-based energy company, is seeking $1 billion from its ATM program, the highest announced in 2017.

How Are They Used?

ATM offerings, a type of “follow-on” to an initial public offering, are tied to a company’s shelf registration statement filed with the Securities and Exchange Commission. The statement permits the issuance of shares through various offerings for three years.

Companies set the amount they want to raise through an ATM program and are free to issue shares until either the full amount is raised, or the program expires. ATM programs are often re-established after the previous goal is met.

Unlike in other follow-on offerings, ATM offerings can be used months or even years after their creation, allowing issuers to strike during upswings in their stock price and trading volume.

“The beauty of it is, the product can be customized to fit the need of the client,” Colucci said. For highly liquid issuers trading millions of shares daily, it’s “very easy to raise tens and in some cases hundreds of millions of dollars.”

“As some [chief financial officers] like to say, it’s just another arrow in their capital-raising quiver,” Colucci said.

About 75 percent of all ATM offerings from 2008 to 2017 were valued between $1 million and $100 million, according to Bloomberg data. But programs worth between $500 million and $1 billion are common.

Iron Mountain Inc., a data security company based in Boston, and Dominion Energy Inc., a Richmond, Va.-based electricity supplier, announced $500 million ATM programs last year.

For big issuers with many shares held by public investors, “you can really go into the markets and sell quite a bit of stock without affecting your price,” said Julian Kleindorfer, a partner with Latham & Watkins LLP who co-chairs the firm’s real estate investment trust (REIT) group.

And that’s compared to normal, underwritten, public executions “where you might have to price at a discount to the last trade, and you might have to pay a higher commission on the equity trade,” he added. “The cost to the issuer of raising that money is less.”

Who Uses Them and Why?

ATM offerings are used in numerous industries, but have become especially popular among companies in industries that undertake frequent fundraising, including life sciences and real estate.

Biotechnology companies that haven’t commercialized their products require a steady cash flow to continue funding their research and development. Rather than hitting the equities markets every two years to build up a war chest, Kleindorfer said ATM offerings allow these firms to “take the pressure off” by match-funding their need on a continuous basis.

REITs are required to distribute most of their taxable income to investors, giving them a continuous need for capital. These companies tend to set their ATM programs for larger amounts than the average offering.

Six of the 10 largest ATM programs announced in 2017 were from REITs. Shopping mall investor Realty Income Corp. had the second-largest program at $920 million, followed by Welltower Inc., which invests in assisted-living communities, with a $784 million program.

“Typically in the REIT space, we have issuers where we are re-upping these programs once every year, or sometimes even twice within a year because they are raising all the money,” Kleindorfer said. His firm, Latham & Watkins, advised 25 ATM offerings on U.S. exchanges announced last year—the third-highest total.

Cooley LLP advised the most ATM deals in 2017 with 41, while Duane Morris advised the second-most with 39.

Lewis Kneib, a Latham & Watkins partner who specializes in corporate finance, said some of the recent increase in these offerings might be because CFOs are getting “more comfortable with the ability to use their ATM [programs] as a part of their capital raising war chest.

The current push to bypass financial institutions may also be contributing to the rise in ATM offerings, Colucci, of Duane Morris, said. “It levels the playing field with the issuer versus the buyer versus the investment bank,” he said, adding that he expects ATM offerings are “only going to continue to gain traction.”

With assistance from Yelena Dunaevsky

To contact the reporter on this story: Jacob Rund at

To contact the editor responsible for this story: Yin Wilczek at

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