Pursuant to General Instruction I.B.6 of Form S-3, companies with a market capitalization of less than $75 million may still use Form S-3 to register primary offerings of securities for an amount equal to up to one-third of their market capitalization in any 12-month period. On August 12, 2010, the SEC issued two new Compliance and Disclosure Interpretations (CDIs) which address how companies should calculate the one-third limitation. Specifically, the SEC confirmed that
- Registrants with an effective shelf registration statement on Form S-3 may not file a prospectus supplement for a new offering of an amount of securities that exceeds the one-third limit, even if the actual amount sold does not exceed the limit. The staff stated that the capacity remaining under the one-third limit in General Instruction I.B.6 is measured immediately prior to the registered takedown and applies to the amount of securities offered for sale pursuant to the prospectus supplement, not the amount actually sold. The concept of rolling measurement dates is limited to different takedowns, not individual sales within a takedown; and
- When measuring the amount of shares available for a later takedown, only those securities actually sold are counted against the one-third limit. However, in the context of multiple, concurrent continuous offerings, any securities that continue to be offered in other continuous offerings in reliance on General Instruction I.B.6 would also count against the one-third limit.