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Simple English definitions for legal terms
shelf offering
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A quick definition of shelf offering:
A shelf offering is when a company wants to sell stocks or bonds to the public, but instead of filing a new application every time, they can use the same paperwork over and over again. This is called a "core prospectus." The company can sell some of the stocks or bonds right away, and then sell more later without having to do more paperwork. Only big and well-known companies can do this. It's good for the company because they can sell their stocks or bonds when the market is good, and they don't have to wait for the government to approve their paperwork every time. But they still have to make sure they tell the truth about their company and any important changes that happen.
A more thorough explanation:
A shelf offering is a type of public offering of securities where the issuer can make multiple offerings based on the same prospectus, known as the core prospectus. This means that the issuer can offer securities whenever they want to take them down from the shelf, without having to file a new registration statement with every offering.
For example, if a company wants to raise money by issuing stocks, they can file a core prospectus with the Securities and Exchange Commission (SEC) and offer a portion of the stocks to the public. Later on, if they want to issue more stocks, they can do so without having to file a new prospectus. This saves time and money for the issuer.
Shelf offerings are only available to seasoned issuers and well-known seasoned issuers. These are companies that have a track record of filing timely and accurate reports with the SEC.
The main advantage of shelf offerings is that they provide timing and certainty to the issuer. They can issue securities when market conditions are optimal, without having to wait for extensive SEC review after they file their core prospectus. The core prospectus also prospectively incorporates by reference the issuer’s periodic reports, meaning the issuer does not need to amend the core prospectus in the event of material developments.
However, it's important to note that Section 11 still applies to subsequent issues in a shelf offering. This means that the issuer must be sure that any material developments are included in disclosures incorporated by reference or file a supplemental prospectus.
Shaughnessy v. United States ex rel. Mezei | shelf registration