COVID-19 crisis leads to rise in Mixed Shelf Filings

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COVID-19 crisis leads to rise in Mixed Shelf Filings

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The COVID-19 pandemic has affected the global financial markets including the US, it has severely impacted the U.S financial markets, commodity markets which include oil and gold markets, stock markets and bond markets. In February end the Dow Jones Industrial Average, S&P 500 Index and the NASDAQ-100 fell more than 3% which was its sharpest fall since the 2008 financial crisis and according to the market experts and economists the market entered into a correction phase, in the month of March the Dow Jones Industrial Average had closed with a 10% fall, the NASDAQ composite had closed with 9.4% fall and the S&P 500 had closed with 9.5% fall, which resulted in the loss in trillions of dollars of the investors. The bond prices (ETF’s) also had fallen in the same way the stock markets dropping below their net asset values.

The pandemic also resulted in the fall of oil prices, as many industries were closed due to lockdown there was no demand, also the OPEC and Russia oil price war impacted the oil prices globally, this affected the revenue of the companies dealing in oil. As the stock markets and the financial markets had suffered a disruption there was a cash crunch in the market, many old retail business companies filed for bankruptcy and closed some of their stores due to low demand. The Federal Reserve later, announced that it will offer $1.5 trillion in repurchase agreements in U.S. Treasury securities to reduce the troubles in the working of the short term market which is used by the banks to lend funds to each other and also the Federal Reserve announced that it will use the Commercial paper facility to buy the commercial papers which will provide cash in the CP markets which can be used by the companies to pay their short term bills and liabilities.

What is Mixed Shelf Filings?

Mixed shelf offering or Shelf offering is a provision of the Securities and Exchange Commission (SEC) that allows the issuer of equity to register a new issue, which gives the issuing corporation the right to issue the securities it in parts or stages and not all at once over a three year period without re-registering with the SEC. This helps the company as it has the freedom to change the timing of the issue including the price, to take the advantages of market conditions which may arise in future.

The Shelf offering can be used the issuer corporation to issue new securities also called as primary offerings, outstanding securities also called as secondary offerings or the company can also issue making a combination of both primary and secondary offerings as per their need to raise capital for business, during the period of three years issue, the company has to report its annual and quarterly earnings along with other disclosures with the SEC. If in the three year period the company has not issued all of their securities as per the filing and the period is near to expiry the company can extend the period by filing a replacement registration with SEC.

Benefits of Shelf Offerings

The shelf offers helps the issuer corporation to access the markets rapidly to take advantage of the market conditions with minimal administrative paperwork, it reduces the cost of the company on administrative expenses as it does not have to register again for a new issue with the SEC. The shelf offering filing gives the company the right to control the process of issue of new or secondary shares. It permits the issuer to control the share price of the offering by managing the supply of the securities in the market. The shelf registration allows the company to mention multiple issues in a single registration statement if the company has a plan to issue new long term securities in the market.

List of Some of the Companies

  1. Bicycle Therapeutics (NYSE: BCYC), on 5th June 2020 has filed for a $250 million mixed shelf offering, which includes ordinary shares, preference shares, debt securities and warrants, the company has not mentioned the amount to be raised using each of them. The company has mentioned that it will use the net proceeds for capital expenditures and working capital and a portion of the net proceeds will be used invest or acquire businesses which is beneficial for the growth of the company.
  2. Ballard Power (NASDAQ: BLDP), on 6th June 2020 has filed for $750 million mixed shelf offering, the company has said that it will use a portion of the net proceeds for product development and market development activities necessary to commercialize their products and services.
  3. NGM Biopharmaceuticals (NASDAQ: NGM), on 5th June 2020 has filed for $400 million mixed shelf offering, which includes common stock, preferred stock, Debt securities and warrants the company has not mentioned the amount to be raised using each of them.
  4. Axcella Health (NASDAQ: AXLA), on 5th June 2020 has filed for $125 million mixed shelf offering, which includes common stock, preferred stock, Debt securities and warrants the company will declare the amount to be raised using each of them at the time of issue. The company has mentioned that it will use the net proceeds from the sale of any securities for research and development costs which includes the conduct of clinical studies or clinical trials and expansion of their infrastructure, support of organizational growth and for capital expenditures.
  5. Digimarc (NASDAQ: DMRC), on 5th June 2020 has filed for $100 million mixed shelf offering, the company has said that it will use the net proceeds of any offering of securities for working capital and other general corporate purposes, which may include the financing of capital expenditures and future acquisitions, the company will declare the amount to be raised using the securities at the time of issue.
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