At-the-market Offerings (ATMs): A Flexible Financing Tool for Public Companies

For companies that have recently gone public, whether through a traditional IPO or a de-SPAC transaction, access to follow-on capital is often a key priority. While traditional follow-on offerings remain available, many companies are increasingly turning to more flexible financing tools. One of the most commonly used options in today’s market is the at-the-market offering program, or “ATM.”

An ATM allows a public company to raise capital gradually by selling shares directly into the open market at prevailing market prices. Compared to traditional equity offerings, ATMs offer greater flexibility, lower execution risk, and more control over timing.

What Is an ATM Offering?

An ATM program enables a public company to sell newly issued shares through a broker-dealer (often referred to as a sales agent) directly into the secondary market. Instead of issuing a large block of shares at a fixed price, the company sells shares incrementally, often in small amounts over time.

In practice, the company establishes an ATM program under a shelf registration statement and enters into a sales agreement with one or more broker-dealers. The company can then instruct the sales agent to sell shares into the market at times it considers favorable, such as when trading volume is high or the stock price is strong.

This “drip” approach allows companies to access capital without the need to launch a marketed offering or negotiate pricing in advance.

Why Are ATMs Attractive?

ATMs have become increasingly popular among newly public companies for several reasons.

First, ATMs provide flexibility in timing and size. Companies can choose when to sell shares and how much to sell, rather than committing to a large transaction at a single point in time. This can be particularly valuable in volatile markets.

Second, ATMs typically involve lower transaction costs than traditional follow-on offerings. Because there is no underwriting syndicate or roadshow, fees are generally limited to sales commissions paid to the agent.

Third, ATMs allow companies to minimize market disruption. Since shares are sold gradually, the impact on the stock price is often less pronounced than a large overnight offering.

Finally, ATMs can be used as a complement to other financing tools, providing ongoing access to capital without requiring a full-scale offering each time funding is needed.

Key Considerations and Limitations

Despite their advantages, ATMs are not suitable for every company.

One key limitation is that ATMs depend on market conditions and trading volume. If a company’s stock is thinly traded or under downward pressure, it may be difficult to raise meaningful capital through an ATM program.

In addition, ATMs require ongoing disclosure and compliance. Because shares are sold continuously, companies must ensure that their public disclosures are current and accurate at all times. Material developments may require updates to offering documents or temporary suspension of sales.

Companies must also consider potential dilution. While dilution occurs gradually, repeated use of an ATM program can have a cumulative impact on existing shareholders.

Finally, companies should be mindful of investor perception. Frequent or poorly timed sales under an ATM program may signal a need for capital and could affect market confidence.

ATMs in the Post-SPAC Context

Companies that have gone public through a de-SPAC transaction often face additional pressure to secure follow-on capital, particularly if redemption levels were high or growth plans require continued investment. In this context, ATMs can serve as a useful tool to supplement capital over time.

However, de-SPAC companies should carefully consider their trading liquidity, disclosure readiness, and investor relations strategy before implementing an ATM program.

Conclusion

ATMs provide public companies with a flexible and efficient way to access capital over time, without the constraints of traditional equity offerings. While they offer significant advantages in terms of timing and cost, they also require careful planning, ongoing compliance, and thoughtful execution.

Our firm regularly advises clients on capital markets transactions, including ATM programs and other post-IPO and post-SPAC financing strategies. If you have questions about whether an ATM program is appropriate for your company or how to structure one, our securities law team would be happy to assist. 

Contact Person: Nick L. Torres, Esq. and Zhiqi Zheng, Esq.