What is a shelf registration? Why would a public firm want to issue securities using a shelf registration?

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What is a shelf registration? Why would a public firm want to issue securities using a shelf registration?

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To reduce registration time and costs, yet still protect the public by requiring issuers to disclose information about the firm and the security to be issued, the SEC passed a rule in 1982 allowing for “shelf registration.” A shelf registration allows firms that plan to offer multiple issues of stock over a two-year period to submit one registration statement as described above (called a master registration statement). The registration statement summarizes the firm’s financing plans for the two-year period. Thus, the securities are shelved for up to two years until the firm is ready to issue them. Once the issuer and its investment bank decide to issue shares during the two-year shelf registration period, they prepare and file a short form statement with the SEC. Upon SEC approval, the shares can be priced and offered to the public usually within one or two days of deciding to take the shares “off the shelf.” Thus, shelf registration allows a firm to get stocks into the market quickly (e.g., in one or two days) if the firm feels conditions (especially the price they can get for the new stock) are right, without the time lag generally associated with full SEC registration.

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