Form S-3: Meaning, Composition, Benefits & FAQs

Form S-3 is a streamlined security registration form used by businesses that have fulfilled other reporting obligations. Only U.S.-based businesses can use Form S-3 to register securities with the SEC by the Securities Act of 1933. Businesses wishing to utilize the S-3 must have fulfilled all Securities Exchange Act of 1934 reporting obligations from sections 12 or 15(d), which operate under the assumption that businesses wishing to register have registered some sort of securities with the SEC.

Key Takeaways

• SEC Form S-3 is a regulatory form, as directed by the SEC, that allows issuers of registered securities to report more easily.
• A company files Form S-3 when a business needs to raise money.
• The SEC Form S-3 is often submitted concurrently with offers of common stock or preferred stock; however, it is occasionally filed following an initial public offering (IPO).
• To take advantage of the streamlined procedure, companies need to fulfill a specific set of prerequisites.

1. Consists of Two Parts: In essence, Form S-3 consists of two components. A cover page, risk considerations, and a prospectus comprise the first part, which will eventually be made available to all prospective investors. Exhibits, undertakings, and other disclosures are included in Part 2 but are not normally sent to investors; instead, they are made public via the SEC’s Electronic Data Gathering, Analysis, and Retrieval (EDGAR) system.

2. Content of Prospectus: The prospectus is made up mainly of a summary section that provides all the important details regarding the security offering, such as the type of asset, whether it is an overallotment option, the exchange (if any) on which it will be listed, and the intended use of the proceeds. Businesses that are very young or unknown are inclined to disclose their business plan, competitive advantages, and frequently even the most basic financial data about their organization.

3. Pricing Terms: Pricing terms are not included in the prospectus until the final copy, which is the version sent to investors together with underwriters’ sales confirmations.

4. Disclosures of Risk Factors: Subsections pertaining to risks related to the offering itself and risks related to the issuing firm often comprise the disclosure of risk factors. The most recent Form 10-K or Form 10-Q filed by the issuing firm contains the majority of the risk factors.

5. Other Information: Depending on the kind of issuing corporation and the security being offered, other parts of the S-3 form that must be included include the plan of distribution, comprehensive descriptions of the securities being registered, and disclosure of the ratio of earnings to fixed charges.

6. Disclosure on Issuers: The expertise of the issuer’s accountants and attorneys, who provide validation of the securities up for sale, is often also included in the S-3 form.

• The S-3 form uses a streamlined procedure. On the other hand, new securities issued by US public firms are initially registered through the S-1 form filing.
• Before shares may be traded on a national market, the paperwork needs to be finished. Most businesses submit their S-1 form before going public.
• A company must provide a prospectus regarding the securities and information about how it plans to use the funds received while completing the S-1 filing, among other important details about the company.

1. Simplified Registration Process: Form S-3 provides a more efficient method of registering an initial public offering (IPO) than the more involved Form S-1. This means that registering will take less time and money.

2. Eligibility for Incorporation by Reference: The Form S-3 may contain some material that has been incorporated by reference from earlier SEC filings. This streamlines preparation and cuts down on duplication.

3. Faster Time to Market: Companies can get financing more rapidly through the Form S-3 procedure than through the conventional registration route because of its simplified process.

4. Reduces Cost: Since Form S-3 is simpler, there is a significant reduction in the legal and accounting costs related to registration.

Form S-3 is a simplified registration statement filed with the SEC by public companies to register securities for offerings after their initial public offering (IPO). Public companies that meet eligibility criteria, including having a substantial public float and a history of past filings with the SEC, Form S-3 is a simpler and faster registration process compared to Form S-1 used for IPOs. The key feature of Form S-3 is that it focuses on registering new securities for offerings, not the company itself.

What happens after a Form S-3 is filed?

The file is examined by the SEC to make sure that all disclosure obligations are met. Following approval, the business can launch its offering.

What information doesn’t Form S-3 typically include?

Form S-3 often does not duplicate information based on background information about the firm because it is based on prior filings. As such, investors should consult earlier filings.

Is there a deadline for filing a Form S-3?

Companies usually register far in advance of their intended offering date to allow for SEC scrutiny; however, there is no hard deadline.

What are some alternatives to Form S-3?

Other registration forms, such as Form S-1 (used for initial public offers) or Form S-8 (used for specific kinds of unregistered offerings), may be appropriate for businesses that don’t fit the standards for Form S-3 eligibility.

What particular details are usually included in a Form S-3?

• The type and quantity of securities offered
• The use of the offering’s proceeds;
• Offering-specific risk factors
• Pricing terms

Reference:

• U.S. Securities and Exchange Commission

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