Question: A registrant meets the registrant requirements for Form S-3, but does not meet the transaction requirements for a primary offering. The registrant has two majority-owned subsidiaries. Would Form S-3 be available for secondary offerings of its securities by the two subsidiaries?

Answer: No. In these circumstances, the offerings of the registrant's securities by its majority-owned subsidiaries would be treated as if they were primary offerings by the registrant, since the subsidiaries are considered alter egos of the registrant. Accordingly, since the registrant is not eligible to use Form S-3 for a primary offering, the offering of the registrant's securities by its subsidiaries likewise may not be registered on Form S-3. [Feb. 27, 2009]

Question: Is Form S-3 available to an issuer that meets the form's registrant requirements to register offers and sales pursuant to customer stock purchase plans?

Answer: Form S-3 is not available to register offers and sales pursuant to customer stock purchase plans unless the issuer meets the form's registrant requirements as well as the transaction requirements for primary offerings set forth in General Instruction I.B.1 of Form S-3. [Feb. 27, 2009]

Question: Is Form S-3 available to register shares underlying options whose exercise consideration can be cash or, in the alternative, shares of the same class as those underlying the options?

Answer: Yes. [Feb. 27, 2009]

Question: In reliance on Securities Act Section 4(2), a merger transaction will not be registered. May resales of earnout shares to be issued in connection with the merger be registered on Form S-3 pursuant to General Instruction I.B.3 after the consummation of the merger, even though the shares have not been earned and are not outstanding at the time the registration statement is filed?

Answer: Yes. [Feb. 27, 2009]

Question: For purposes of computing the "float" under General Instruction I.B.1, what day should be used in determining the number of shares held by non-affiliates?

Answer: General Instruction I.B.1 to Form S-3 provides, in part, that the form may be used for a primary offering when the aggregate market value of the outstanding voting and non-voting common equity held by non-affiliates of the registrant is $75 million or more. As the instruction indicates, the aggregate market value may be computed by taking the average of the bid and asked prices of such common equity, as of a date within 60 days prior to the date of filing, and multiplying that price by the number of shares of such common equity held by non-affiliates. In making this computation, it is not necessary to calculate the number of shares held by non-affiliates for the same day on which the average price of the stock is determined. For example, the number of shares outstanding on the date of filing might be used, together with the average price of stock for any day within the 60-day period. [Feb. 27, 2009]

Question: When a registrant reassesses Form S-3 eligibility in connection with a Section 10(a)(3) update, for purposes of computing the "float" under General Instruction I.B.1, what day should be used in determining the number of shares held by non-affiliates?

Answer: The registrant can use any day during the 60-day "look back" period from the filing date of the Form 10-K in determining the number of shares held by non-affiliates. [Feb. 27, 2009]

Question: General Instruction I.B.I requires that the aggregate market value of the voting and non-voting common equity held by non-affiliates be at least $75 million. In order to calculate whether this condition has been met, must the common equity be traded on a public market, such as an exchange, the OTC Bulletin Board, or the Pink Sheets?

Answer: Yes. [Feb. 27, 2009]

Question: What is the meaning of the "for cash" requirement in General Instruction I.B.1 of Form S-3?

Answer: The "for cash" reference was intended only to make clear that Form S-3 is not available for exchange offers or other business combination transactions. Accordingly, Form S-3 would be available, for example, for transactions in which the consideration for the securities consists of promissory notes or services performed for the issuer by the recipient of the securities. [Feb. 27, 2009]

Question: May a company use Form S-3 to register the offer and sale of both an immediately convertible security and the underlying security?

Answer: Yes. A company meeting the float test of General Instruction I.B.1 of Form S-3 may use that form to register the offer and sale of both an immediately convertible security and the underlying security. The fact that subsequent conversions may occur at a time when the company does not meet the transaction requirement of General Instruction I.B.4 of Form S-3, which is available for conversions, would not affect the initial registration of the offer of such underlying securities. If it becomes necessary to update the registration statement in accordance with Section 10(a)(3), the company may accomplish such update by incorporation by reference or post-effective amendment on Form S-3 only if it meets the conditions for the use of the form at that time. [Feb. 27, 2009]

Question: In order to use General Instruction I.B.3 of Form S-3 for the secondary offering of a convertible or exercisable security, such as a common stock purchase warrant, is it necessary that the warrants themselves be listed on an exchange or quoted on an automated quotation system of a national securities association?

Answer: No. The fact that the underlying common stock is listed or quoted is sufficient to satisfy the requirements of the instruction. [Feb. 27, 2009]

Question: For purposes of General Instruction I.B.3 of Form S-3, does "quoted on the automated quotation system of a national securities association" include securities quoted on the OTC Bulletin Board or the Pink Sheets?

Answer: No. [Feb. 27, 2009]

Question: Are securities to be issued in an exchange exempt under Securities Act Section 3(a)(9) deemed outstanding for purposes of General Instruction I.B.3 of Form S-3?

Answer: Yes. [Feb. 27, 2009]

Question: If an issuer meets the float test in General Instruction I.B.1 of Form S-3, may it use Form S-3 for secondary offerings, even though the securities to be issued are not listed on a national securities exchange or quoted on an automated quotation system of a national securities association, as required by General Instruction I.B.3?

Answer: Yes. [Feb. 27, 2009]

Question: May parents, subsidiaries or affiliates of the issuer rely on Rule 415(a)(1)(i) to register secondary offerings?

Answer: Rule 415(a)(1)(i) excludes from the concept of secondary offerings sales by parents or subsidiaries of the issuer. Form S-3 does not specifically so state; however, as a practical matter, parents and most subsidiaries of an issuer would have enough of an identity of interest with the issuer so as not to be able to make "secondary" offerings of the issuer's securities. Aside from parents and subsidiaries, affiliates of issuers are not necessarily treated as being the alter egos of the issuers. Under appropriate circumstances, affiliates may make offerings that are deemed to be genuine secondaries. [Jan. 26, 2009]

Question: The Skadden Arps/Registration of Rights Issuable Pursuant to Stockholder Rights Plans no-action letter (Jan. 7, 1987) issued by the Division relates to registration requirements in connection with rights plans. As described in the no-action letter, a prospectus to a previously effective Form S-3, pursuant to which sales are still being made, may be revised to reflect the rights plan by filing a Rule 424(c) prospectus supplement. For a Form S-8, Rule 428 would apply instead of Rule 424(c). However, if a company has an existing rights plan and is filing any new Securities Act registration statement for shares of the class of security to which the rights relate, should the rights be registered on the new registration statement as a separate security?

Answer: Yes. [Feb. 27, 2009]

Question: Securities to be issued in connection with business combinations may be registered on a shelf filing pursuant to Rule 415(a)(l)(viii). May Form S-3 be used for these purposes?

Answer: No. Form S-3 is not available for business combinations. Form S-3 may be used for a secondary offering of shares which were originally received from the issuer in connection with a business combination, assuming it is a genuine secondary offering. [Feb. 27, 2009]

Question: A company privately placed convertible securities in reliance on the exemption provided by Section 4(2). The company agreed to file a registration statement within two months after the private placement closing to register the resale of the common stock issuable on conversion of the convertible securities. The securities were convertible into common stock using a conversion ratio based on the company's common stock trading price at the time of conversion. Can the company use Form S-3 to register the resale of the common stock prior to conversion? Can the company use Rule 416 to register for resale an indeterminate number of shares that it may issue due to the operation of the conversion formula?

Answer: If the company satisfies the Form S-3 registrant eligibility requirements and the offering satisfies the Form's secondary offering requirements, the company may use Form S-3 to register, prior to the conversion, the resale of the common stock issuable upon conversion of the outstanding convertible securities. The company may not use Rule 416 to register for resale an indeterminate number of shares resulting from operation of the conversion formula. Rule 416 does not apply by its terms in these circumstances, because the floating conversion rate is not "similar" to an anti-dilution provision. Instead, the company must make a good-faith estimate of the maximum number of shares that it may issue on conversion to determine the number of shares to register for resale. If the number of registered shares is less than the actual number issued, the company must file a new registration statement to register the additional shares, assuming the selling securityholder desires to sell those additional shares. It may use Rule 462(b), if available, for this purpose.

The selling securityholder information in the registration statement, at the time of effectiveness, must include the total number of shares of common stock that each selling securityholder intends to sell (based on current market price if there is a floating conversion rate tied to market price), regardless of any contractual or other restriction on the number of securities a particular selling securityholder may own at any point in time. As the selling securityholders resell shares of common stock following conversion, the company must file prospectus supplements, as necessary, to update the disclosure of the number of shares that each selling securityholder intends to sell, reflecting prior resales. The plan of distribution in the prospectus filed as part of the registration statement must specify, in compliance with Item 508 of Regulation S-K, how each selling securityholder intends to dispose of the securities it receives on conversion. [Nov. 26, 2008]

Question: A company privately placed convertible securities in reliance on the exemption provided by Section 4(2), but has not yet issued some or all of the convertible securities. The company agreed to file a registration statement within two months after the private placement closing to register the resale of the common stock issuable on conversion of the convertible securities. The securities were convertible into common stock using a conversion ratio based on the company's common stock trading price at the time of conversion. Can the company use Form S-3 to register the resale of the common stock prior to conversion?

Answer: Unless the transaction involving the issuance of the convertible security meets the conditions under which a company may file a registration statement for resale of privately placed securities before their actual issuance (commonly known as a "PIPE," or private-investment, public-equity transaction, as discussed below), the registration for resale of the common stock underlying the unissued convertible security would not be viewed as a valid secondary offering. Instead, the transaction would be treated as an indirect offering by the issuer, and thus a primary offering, with the investor being identified in the registration statement as an "underwriter." In such circumstances, the registration statement may not use the phrase "may be an underwriter." Instead, the disclosure in the registration statement must state that the investor "is an underwriter." As a result, the company may register on Form S-3 the resale of the underlying common stock, or the convertible security itself, only if the company is eligible to use that Form for a primary offering. In addition, if the company continues to sell privately additional convertible securities after it has filed the registration statement for the securities underlying the previously sold convertible securities, the continuation of the same offering may call into question the Section 4(2) exemption generally claimed for the entire convertible securities offering.

In a PIPE transaction, a company will be permitted to register the resale of securities prior to their issuance if the company has completed a Section 4(2)-exempt sale of the securities (or in the case of convertible securities, of the convertible security itself) to the investor, and the investor is at market risk at the time of filing of the resale registration statement. The investor must be irrevocably bound to purchase a set number of securities for a set purchase price that is not based on market price or a fluctuating ratio, either at the time of effectiveness of the resale registration statement or at any subsequent date. When a company attempts to register for resale shares of common stock underlying unissued, convertible securities, the PIPE analysis applies to the convertible security, not to the underlying common stock. There can be no conditions to closing that are within an investor's control or that an investor can cause not to be satisfied. For example, closing conditions in capital formation transactions relating to the market price of the company's securities or the investor's satisfactory completion of its due diligence on the company are unacceptable conditions. The closing of the private placement of the unissued securities must occur within a short time after the effectiveness of the resale registration statement. [Nov. 26, 2008]

Question: An issuer intended to grant rights to subscribe to shares of common stock (on a pro rata basis to all shareholders) after it filed a registration statement on Form S-3. The issuer was not eligible to rely on General Instruction I.B.1 of Form S-3 because it did not have the requisite public float, and the aggregate amount of securities that the issuer intended to register exceeded the amount permitted pursuant to General Instruction I.B.6. Can the issuer rely on General Instruction I.B.4 to file a Form S-3 registration statement to cover the issuance of the shares on exercise of the rights prior to the time that the issuer granted the rights and without complying with the information provision requirements of that instruction?

Answer: No, the issuer could not rely on General Instruction I.B.4 to file the Form S-3 registration statement because the rights are not outstanding at the time of the filing of the registration statement, and the issuer would not be able to satisfy the requirement that an annual report and other disclosures be provided to the holders of the rights prior to the filing of the registration statement. Similarly, an issuer could not conduct a takedown of the securities off an effective unallocated shelf registration statement in reliance on General Instruction I.B.4 if the rights are not outstanding at the time of the takedown. The issuer could file a Form S-1 to register the rights offering if the offering would be made on a continuous basis in reliance on Rule 415(a)(1)(ix).

In addition, although General Instruction I.B.4 of Form F-3 does not have the same requirement to provide specified information to the holders of the rights, Form F-3 does require that the rights are outstanding at the time the registration statement is filed. Therefore, similar to Form S-3, foreign private issuers could not rely on General Instruction I.B.4 of Form F-3 to conduct such offerings. [Aug. 14, 2009]

Question: How does a company register, as a primary offering (rather than as a "resale" registration in a private equity line financing), the issuance of the put securities under an equity line?

Answer: An equity line financing done as a primary offering in which the put price is based on or at a discount to the underlying stock's market price at the time of the put exercise is an "at the market" offering under Rule 415(a)(4) and must comply with the requirements of that rule. Further, to register the primary offering, the company must be eligible to register primary offerings on Form S-3 in reliance on General Instruction I.B.1 or General Instruction I.B.6 of such form or on Form F-3 in reliance on General Instruction I.B.1 or General Instruction I.B.5 of such form. In addition, if a company is relying on General Instruction I.B.6 of Form S-3 or on General Instruction I.B.5 of Form F-3, the total amount of securities issuable under the equity line agreement may represent no more than one-third of the company's public float at the time of execution of the equity line agreement. [Nov. 26, 2008]

Question: May a company with an effective shelf registration statement on Form S-3, in reliance on General Instruction I.B.6, file a prospectus supplement for a new offering of an amount of securities that exceeds the 1/3 limit of the instruction, so long as the actual amount sold does not exceed the limit?

Answer: No. The capacity remaining under the 1/3 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. When measuring the amount available for a later takedown, only those securities actually sold are counted against the 1/3 limit. [Aug. 11, 2010]

Question: A company is able to sell up to $10 million in securities using its effective shelf registration statement on Form S-3, in reliance on General Instruction I.B.6. On Monday, June 7, the company files a prospectus supplement to offer and sell up to $5 million of securities in a continuous offering. The company promptly begins its offering and has sold $2.5 million of securities to date. The company intends to file a prospectus supplement for another continuous offering on the following Monday, June 14. What is the maximum amount of securities that can be offered by the June 14 prospectus supplement, assuming the 1/3 limit in General Instruction I.B.6 continues to be $10 million?

Answer: The general rule is that, when measuring the amount available for a later takedown, only those securities actually sold are counted against the 1/3 limit.

See

Question 116.22. In the context of multiple, concurrent continuous offerings, however, any securities that continue to be offered in other continuous offerings in reliance on General Instruction I.B.6 would also count against the 1/3 limit. In this example, the company has sold $2.5 million of securities to date and therefore, as of June 14, can offer and sell up to $7.5 million of securities pursuant to General Instruction I.B.6. Because the company continues to offer up to $2.5 million of securities with the June 7 prospectus, it can only offer and sell up to $5 million of securities with the June 14 prospectus. To permit otherwise would allow a company to do in two or more transactions what it cannot do in one transaction. [Aug. 11, 2010]

Question: In calculating whether the size of an offering consisting of common stock and warrants exceeds the one-third cap in General Instruction I.B.6(a) of Form S-3, is an issuer required to follow Instruction 2 to General Instruction I.B.6 when the warrants are not exercisable for common stock within 12 calendar months?

Answer: Yes. Instruction 2 to General Instruction I.B.6 applies to calculating the market value of warrants for purposes of the one-third cap, even when the warrants are not exercisable for common stock within 12 months. [May 16, 2013]

Question: An issuer with less than $75 million in public float is eligible to use Form S-3 for a primary offering in reliance on Instruction I.B.6, which permits it to sell no more than one-third of its public float within a 12-month period. May it sell securities to the same investor(s), with a portion coming from a takedown from its shelf registration statement for which it is relying on Instruction I.B.6 and a portion coming from a separate private placement that it concurrently registers for resale on a separate Form S-3 in reliance on Instruction I.B.3, if the aggregate number of shares sold exceeds the Instruction I.B.6 limitation that would be available to the issuer at that time?

Answer: No. Because we believe that this offering structure evades the offering size limitations of Instruction I.B.6, the securities registered for resale on Form S-3 should be counted against the issuer’s available capacity under Instruction I.B.6. Accordingly, an issuer may not rely on Instruction I.B.3 to register the resale of the balance of the securities on Form S-3 unless it has sufficient capacity under Instruction I.B.6 to issue that amount of securities at the time of filing the resale registration statement. If it does not, it would need to either register the resale on Form S-1 or wait until it has sufficient capacity under that instruction to register the resale on Form S-3. [November 2, 2016]