An at-the-market equity offering sales agreement (ATM) is a widely used method for raising funds by publicly traded companies. It is a type of equity offering where the company sells its shares to the public through a broker or underwriter. The proceeds from the sale of shares are then used to fund business operations, acquire assets, or pay down debt.
ATM offerings provide several advantages to companies. Firstly, they provide a flexible and cost-effective way to raise capital. Secondly, they allow companies to sell shares in the market when the demand is high and withdraw from the market when the demand is low. This flexibility allows companies to avoid dilution of their shares and maintain a healthy balance sheet.
The sales agreement for an ATM offering sets out the terms and conditions of the agreement between the company and the broker. The agreement specifies the number of shares the company would like to sell, the minimum and maximum price at which the shares can be sold, and the duration of the offering.
One of the critical aspects of an ATM offering sales agreement is the timing of the sale of shares. The agreement must specify the timeframes when the broker can sell the company`s shares in the market. The timing of the sale is critical as it affects the price and demand for the shares.
Another important aspect of an ATM offering sales agreement is the pricing of the shares. The agreement must specify the minimum and maximum price range within which the shares can be sold. The company must strike a balance between pricing the shares high enough to raise sufficient funds but low enough to attract buyers.
ATM offerings have become increasingly popular with small and mid-cap companies seeking to raise capital without incurring significant expenses. The sales agreement for an ATM offering is critical in ensuring that the company raises the required funds without diluting the equity of existing shareholders.
In conclusion, an at-the-market equity offering sales agreement is an essential document for publicly traded companies seeking to raise capital. The agreement must specify the terms and conditions of the offering, including the price range, timing of the sale, and the number of shares to be sold. Companies and their legal teams must ensure that the agreement strikes a balance between raising sufficient funds and not diluting the equity of existing shareholders.