ATM (At-The-Market) offering is a type of public offering in which a company can sell its shares at the current market price through an intermediary, such as an investment bank or broker-dealer. ATM offerings have become increasingly popular in recent years as a way for companies to raise capital without the traditional underwriting process. In this article, we will explore what is ATM offering is, how it works, its benefits and risks.
Understanding ATM Offering
At-The-Market (ATM) offering is a type of public offering in which a company can sell its shares at the current market price through an intermediary. This type of offering allows the company to sell its shares directly to the public, bypassing the traditional underwriting process. The shares are sold at the current market price, which means that the company may receive more or less than the current market price for its shares.
How ATM Offering Works
In an ATM offering, the company enters into an agreement with an intermediary, such as an investment bank or broker-dealer, to sell its shares directly to the public at the current market price. The intermediary is responsible for selling the shares on behalf of the company and may receive a commission for its services. The company can sell its shares over a period of time, which provides flexibility and allows the company to take advantage of favorable market conditions.
Benefits of ATM Offering
ATM offerings provide several benefits for companies, including the ability to raise capital quickly and easily, the ability to take advantage of favorable market conditions, and the ability to avoid the costs and time associated with traditional underwriting. Additionally, ATM offerings do not require the company to disclose as much information as other types of public offerings, which can be beneficial for companies that want to maintain their privacy.
Risks of ATM Offering
ATM offerings also come with some risks for investors, including the potential for dilution of existing shares, potential downward pressure on the stock price due to increased supply, and the potential for the company to issue the shares at a price that is lower than the current market price. Additionally, because ATM offerings do not require the company to disclose as much information as other types of public offerings, investors may not have access to all the information they need to make informed investment decisions.
Conclusion
ATM offerings are a type of public offering that allows companies to sell their shares directly to the public at the current market price through an intermediary. While ATM offerings provide several benefits for companies, they also come with risks for investors. By understanding what ATM offering is, how it works, its benefits and risks, investors can make informed decisions about their investments.
