SEC EXPANDS USE OF FORM S-3 FOR PRIMARY OFFERINGS

The Securities and Exchange Commission (“SEC”) amended the filing requirements to enable certain public companies to conduct primary securities offerings on Form S-3 (Form F-3 for foreign issuers).  The SEC eliminated the requirement that a company filing a Form S-3 have a minimum public float of $75 million, provided it has a class of common equity securities listed on a national securities exchange and does not sell more than the equivalent of one-third of its public float in primary offerings over any period of twelve calendar months.

A Form S-3 is a short form registration statement available for companies that have timely filed their Exchange Act reports for the past twelve months registering primary or secondary offerings of securities.  Companies that are eligible to use Form S-3 for primary offerings may conduct primary offerings “off the shelf” under Rule 415.  Under the current rules, to use Form S-3 for a primary offering of equity securities, a company must and have a public float of at least $75 million, and, for a secondary offering (resale by selling shareholders) a company must have a class of common equity securities listed on a national securities exchange.

The amendments will allow a company that does not have a public float of at least $75 million to still use Form S-3 for primary offerings provided the company:

• has a class of securities registered under the Securities Exchange Act of 1934, as  amended (the “Exchange Act”);
  
  
• has been subject to the Exchange Act reporting requirements, and has filed in a timely manner such reports, for at least twelve calendar months immediately preceding the filing of the Form S-3 registration statement;
  
  
• has a class of common equity securities that is listed and registered on a national securities exchange (which excludes the OTC Bulletin Board and Pink Sheets);
  
  
• does not sell more than one-third of its public float in primary offerings using Form S-3 over the previous period of twelve calendar months; and
  
  
• is not a shell company and has not been a shell company for at least twelve calendar months before filing the registration statement.

A former shell company that cannot meet the $75 million float test but otherwise satisfies the other Form S-3 requirements will become eligible to use Form S-3 to register primary offerings of its securities provided that such company:

• has not been a shell company for at least twelve calendar months; and
  
  
• has filed information that would be required in a Form 10 registration statement (typically referred to as a “Super 8-K”).

Although the one-third cap severely limits smaller listed companies from the benefits afforded by Form S-3, such companies may still register shares in excess of such amount but take down shelf offerings depending on their market cap at the time of the takedown.  As such these companies should still consider filing a Form S-3 “off-the-shelf” registration.

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© 2008 by Tarter Krinsky & Drogin LLP
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