SEC Provides Guidance for “Baby Shelf” Limited ATM Issuers

At a Glance

• If an issuer were to file a prospectus supplement for an ATM facility pursuant to an effective Form S-3, and such issuer was eligible to offer and sell securities in reliance on General Instruction I.B.1 at the time of filing, then any subsequent baby shelf restrictions would not alone reduce the amount that could be sold pursuant to such ATM facility. 
• We believe that the underlying principle for the CFI is that the measurement date for an ATM is the filing date for the preliminary prospectus supplement (or the final prospectus supplement if there is no preliminary), and therefore the measurement date does not change when there is a Section 10(a)(3) update to the registration statement, thus allowing an ATM facility to remain open with its initially filed availability. 

The US Securities and Exchange Commission’s (SEC) Division of Corporation Finance (Corp Fin) has provided issuers with clarity on how to treat an at-the-market (ATM) facility that was put into place via the filing of a prospectus supplement to an effective Form S-3 while the issuer was not subject to the restrictions of I.B.6 — otherwise known as baby shelf restrictions — but that subsequently becomes subject to such baby shelf restrictions on its next measurement date. 

Below is the specific Q&A that was published by Corp Fin on March 19, 2026 (CFI (formerly C&DI) 116.26).

Question: A company entered into a sales agreement with a named selling agent for an at-the-market offering of an amount of securities that the company reasonably expected to offer and sell. The company had an effective Form S-3 registration statement, was eligible to offer and sell securities in reliance on General Instruction I.B.1, and filed a prospectus supplement for the offering. At the time of its next Section 10(a)(3) update, the company does not meet the $75 million public float requirement of Instruction I.B.1 but remains eligible to use Form S-3 in reliance on General Instruction I.B.6 (the “baby shelf”). Will the staff object if the company continues to offer and sell the full amount of securities covered by the prospectus supplement even if that amount would exceed the offering limits of General Instruction I.B.6?

Answer: Under these circumstances, the staff will not object if the company continues offering and selling the full amount of securities covered by the prospectus supplement that was filed prior to the Section 10(a)(3) update.

Analysis

As detailed above, if an issuer were to file a prospectus supplement for an ATM facility pursuant to an effective Form S-3, and such issuer was eligible to offer and sell securities in reliance on General Instruction I.B.1 at the time of filing, then any subsequent baby shelf restrictions would not alone reduce the amount that could be sold pursuant to such ATM facility. 

For example, if on January 1, 2026, an issuer were to file a prospectus supplement pursuant to an effective Form S-3 Registration Statement for a $100 million ATM facility, and such issuer was eligible to offer and sell securities in reliance on General Instruction I.B.1 at the time of filing, then on March 15, 2026, upon the filing of its Form 10-K, its public float was calculated at $50 million and therefore such issuer was determined to be subject to baby shelf restrictions, such determination would not reduce the size or limit the amount that could be sold pursuant to its $100 million ATM facility.

This guidance does not specifically address whether an issuer that files a prospectus supplement for an ATM facility pursuant to an effective Form S-3 at a time it is subject to baby shelf restrictions can continue to sell the full amount included on such prospectus supplement if its baby shelf capacity is reduced at its next measurement date. 

That being said, we believe that the underlying principle for the CFI is that the measurement date for an ATM is the filing date for the preliminary prospectus supplement (or the final prospectus supplement if there is no preliminary), and therefore the measurement date does not change when there is a Section 10(a)(3) update to the registration statement, thus allowing an ATM facility to remain open with its initially filed availability. 

For example, if on January 1, 2026, an issuer were to file a prospectus supplement pursuant to an effective Form S-3 for a $20 million ATM facility, which was the maximum amount that such issuer was eligible to offer and sell at such time pursuant to General Instruction I.B.6 as a result of having a public float of $60 million and $0 sold pursuant to such Form S-3 in the last 12 months, and on March 15, 2026, upon the filing of its Form 10-K, its public float was calculated at $15 million, then the above guidance supports, albeit not directly, that the issuer could continue to utilize the full $20 million included on the prospectus supplement and would not need to re-calculate the amount that could be sold to reflect the $5 million of baby shelf capacity that is available as of such measurement date based on its $15 million public float.