RAISING THE BAR IN AT-THE-MARKET (ATMs) OFFERINGS: THE CERTAINTY OFFERED BY PRINCIPAL-TYPE ATM TRANSACTIONS

By George Kanakis and Troy Rillo, Yorkville Advisors LLC

At-the-market (ATMs) offerings have become a popular financing tool in today’s volatile market. Earlier this year, Bank of America completed its own ATM of $13.5 billion in perhaps the largest ATM conducted to date. In an ATM, a public issuer sells, through an intermediary, new equity into the market at prevailing market prices – hence the name “at-the-market” offering. In a rising market, ATMs often result in equity being sold at increasing prices. This results in less dilution than in traditional equity raises conducted at a single time and single price.

Traditional equity raises are commonly referred to as “follow-on” offerings or placings. Such offerings are marketed by means of a road show in which senior management conducts weeks of marketing the stock to potential buyers. Stock prices often decline as a result of such road shows because of the uncertainty as to whether the required amount will be raised, and at what price, which can increase the cost of capital. Some advantages of ATMs compared to follow-on placings are:
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TOPS Share Sale

Last week, Top Ships Inc. (“TOPS”) entered into a shelf registration to sell up to $500 million of common shares, preferred shares and warrants, including the sale of 70,462,300 common shares by selling shareholders. Contemporaneously, the company also entered into a Standby Equity Distribution Agreement (“SEDA”) with YA Global Master SPV LTD (“YA Global”), an investment vehicle managed by Yorkville Advisors LLC, who previously utilized a similar structure with OceanFreight. Under the latter agreement, which is sometimes referred to as an equity line of credit arrangement, TOPS has the option, for a three year period from the effective date of a registration statement, to sell its common shares to YA Global for a total of up to $200 million, at the company’s sole discretion. YA Global intends to sell up to an estimated amount of 70,462,300 of these shares.

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