What is a Shelf Offering?

Shelf offerings are registrations of new securities issues that are prepared in advance of the actual date of release, allowing the issuer to hold the shares until market conditions are most favorable. Sometimes referred to as a shelf registration, a shelf offering can be registered as much as two years in advance. In most nations, government regulatory agencies set the specific guidelines for the registration process and the exact time frame that the registered shares can be withheld before they must be placed on the market.

While many companies choose to structure a shelf offering with the idea of holding the shares until the market demand for those shares is high, it is possible to release the shares any time the company desires. For example, a business may choose to release a shelf offering ahead of its internal schedule as a means of raising funds for a new project that is not included in the current year’s budget. Should the business experience a temporary downturn in sales revenue, the shares included in the offering may also be released as a means of providing operating capital that will tide the business through the temporary decrease in sales.

In many nations that allow a shelf offering to be registered, the company will have up to two calendar years from the date of the registration to actually place the shares on the open market. This is true in the United States, where the Securities and Exchange Commission (SEC) provides two full years. In other parts of the world, the time limit may range anywhere between one and two years. While this window of time remains more or less constant in most nations, it is important to check with a financial professional who is well versed in the current regulations that apply to the registration and issuing of securities.

A shelf offering provides a business with the maximum amount of control over the process of offering shares to new and existing investors. By holding the shares until just the right time, the company always has a resource available to use in the event of some sort of financial crisis. At the same time, the offering makes it possible to quickly raise funds for any type of expansion project that was not accounted for in the corporate budget. This advantage allows the business to move forward with opening a new facility or releasing a new product now rather having to wait until the budget can be amended to provide financing for that project.