What is 'Shelf Offering'

A shelf offering is a Securities and Exchange Commission (SEC) provision that allows an issuer to register a new issue security without selling the entire issue at once. The issuer can sell portions of the issue over a three-year period without re-registering the security or incurring penalties. A shelf offering is also known as a shelf registration.

BREAKING DOWN 'Shelf Offering'

A shelf offering can be used for sales of new securities by the issuer (primary offerings), resales of outstanding securities (secondary offerings) or a combination of both. Companies that issue a new security can register a shelf offering up to three years in advance, which effectively gives it that long to sell the shares in the issue. Depending on the type of security and the nature of the issuer, forms S-3, F-3 or F-6 must be filed in order to do the shelf offering. During this period, the issuer still has to file the quarterly, annual and other disclosures with the SEC even if it hasn't actually issued any securities under the offering. If the three-year window draws close to expiring and the company hasn't sold all of the securities in the shelf offering, it can file replacement registration statements to extend it.

A shelf offering enables an issuer to access markets quickly, with little additional administrative paperwork, when market conditions are optimal for the issuer. The primary advantages of a shelf registration statement are timing and certainty. When a firm finally decides to act on a shelf offering and issue actual securities to the market, it's called a takedown. Takedowns can be made without the SEC’s Division of Corporation Finance’s review or delay. For example, suppose the housing market is heading toward a dramatic decline. In this case, it may not be a good time for a home builder to come out with its second offering, as many investors will be pessimistic about companies in that sector. By using a shelf offering, the firm can fulfill all registration-related procedures beforehand and act quickly when conditions become more favorable.

Additional Benefits of Shelf Offerings

A shelf offering provides an issuing company with tight control over the process of offering new shares. It allows the company to control the shares' price by allowing the investment to manage the supply of its security in the market. A shelf offering also enables a company to save on the cost of registration with the SEC by not having to re-register each time it wants to release new shares.

  1. The Infinite Shelf

    The infinite shelf refers to the practically limitless number ...
  2. SEC Form F-3

    A filing with the Securities and Exchange Commission (SEC) required ...
  3. SEC Form F-6

    A filing with the Securities and Exchange Commission (SEC) required ...
  4. SEC Form F-4

    A filing with the Securities and Exchange Commission (SEC) required ...
  5. SEC Form SB-1

    A filing with the Securities and Exchange Commission (SEC) that ...
  6. SEC Form F-7

    A filing with the Securities and Exchange Commission (SEC) that ...
Related Articles
  1. Investing

    The Issuance Procedure of High-Yield Bonds

    The issuance of corporate high-yield bonds can have several advantages over equity. A closer look.
  2. Financial Advisor

    How to Create a New Financial Product in 10 Steps

    The 10 steps outlined here are essential to the creation of a new financial product.
  3. Investing

    When Your Bond Comes Calling

    Callable bonds can leave investors with a pile of cash in a low-interest market. Find out what you can do about it.
  4. Investing

    Corporate Bonds and the Importance of Covenants

    Any type of investor, private or institutional, should be acquainted with the significance of covenants in corporate bond agreements.
  5. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  6. Investing

    Kroger Will Compete with E-Commerce Competitors

    Kroger is also working on a "digital shelf" concept in a bid to keep with with competitors in the ever-evolving e-commerce business.
  7. Investing

    SEC Employees Enjoy Same Hefty Investment Returns as Insider Traders They Prosecute

    SEC employees are getting huge investment returns just like the companies they investigate for insider trading.
  8. Financial Advisor

    7 Questions to Consider Before Investing in Bonds

    There is a significant number of questions every investor, private or institutional, should consider before investing in bonds.
  9. Investing

    How To Start a Hedge Fund In the United States

    A general overview of how to start a hedge fund firm in the United States, including complying with state and federal regulations.
  1. Who facilitates buying and selling on the primary market?

    Learn more about the primary marketplace -- home of initial public offerings -- and the major players that make buying and ... Read Answer >>
  2. How long are credit ratings valid?

    Learn how credit ratings are issued and how long they are valid. Investors look to credit ratings to determine risk associated ... Read Answer >>
  3. How important is credit rating on a fixed income security?

    Learn how credit ratings for fixed-income securities impact the yield and provide guidance for the amount of risk for the ... Read Answer >>
  4. Who are the key players in the bond market?

    The bond market can essentially be broken down into three main groups: issuers, underwriters and purchasers. The issuers ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture.
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center