Actionable Ideas for Companies and Sponsors

At-The-Market Equity Offerings as a Capital Raising Alternative in Volatile Markets

Historically, ATMs have been used almost exclusively by large liquid REITs or small-cap issuers. However, they increasingly are being used by a broader range of companies for various financing needs, and are a particular useful execution format for issuers during periods of heightened market volatility and if there is uncertainty around the execution of a larger traditional follow-on offering.

In the first half of 2016, there were 95 ATM offerings announced for $16.0 billion, and we expect ATM issuance to accelerate given the decline in traditional equity follow-on activity and larger file-to-offer discounts in recent months. ATM programs offer many advantages including:

  • The ability to sell equity only at desirable prices and times, giving the Company complete discretion over execution of any sales
  • Mitigating the file-to-offer discount associated with a traditional public equity offering
  • The ability to capitalize on periods of increased volatility, such as company news events or index inclusion announcements
  • Uncovering significant reverse inquiry, as investors often reach out to the manager of the ATM directly to inquire about buying stock, and the issuer can sell a large block of stock directly at any time under its ATM