In a registered direct offering, commonly known as an RD, a company engages a placement agent to privately and confidentially market its securities on a “best efforts” basis to a targeted group of institutional investors. After the placement agent has built the book, the company uses an effective registration statement on Form S-3 to effect a “takedown” from the shelf. While this type of offering has characteristics of a private offering, the shares issued in an RD are registered and freely tradeable. If properly structured on the front end, an RD can be conducted on a short timetable, making it an appealing choice for fundraising in volatile markets.


  • Short timeframe - RDs can be completed more quickly than traditional firm commitment offerings.
  • Confidential marketing - RDs are marketed confidentially to investors without disrupting the market before the offering is priced. This allows issuers the opportunity to test the market confidentially and to withdraw the offering if pricing terms aren’t attractive without public disclosure.
  • More attractive pricing - Depending on market conditions, shares sold in an RD have less of a discount to market than in a fully private and exempt offering, like a PIPE, because the shares are immediately freely tradeable.
  • Increase institutional ownership - Because RDs are confidentially marketed, typically to institutional investors, they can be an efficient way to raise funds while adding institutional investors to a company’s stockholder base. 


  • Must be Form S-3 eligible - RDs are not available to issuers that are not eligible to use Form S-3.
  • Comply with “Baby Shelf” rules - Issuers with a non-affiliate market cap of less than $75 million must limit the size of all offerings over a rolling 12-month period to one-third of their current public float. This ceiling may make this option less appealing for small-cap or micro-cap issuers.
  • Potential NYSE or Nasdaq roadblocks - Prior stockholder approval is required for NYSE and Nasdaq-listed companies if the offering is not a public offering, priced at a discount, and results in an issuance of 20% or more of the issuer’s outstanding common stock.
  • Management involvement - Key members of the issuer’s management team are typically involved in the marketing efforts and calls with institutional investors, which may distract them from the day-to-day operations of the issuer’s business. 

Before structuring a registered direct offering, a company should consider:

  • 20% Rule: stockholder vote requirement
    • The issuer must either issue less than 20% of its outstanding common stock or obtain stockholder approval before conducting an RD.
    • Warrant coverage in the offering will count for purposes of the 20% rule unless (1) exercise price is equal to or exceeds market value; (2) not exercisable for six months; and (3) does not contain anti-dilution or price protection features or a variable exercise price based on Black-Scholes.
  • Baby Shelf Rules
    • Issuers subject to the “Baby Shelf” rules are not permitted to sell more than one-third of their non-affiliate market cap during any trailing 12-month period.
    • This capacity is re-measured before any potential shelf offering and can fluctuate based on the market price of the issuer’s shares and the issuer’s affiliates’ holdings.
  • Avoid Regulation FD violations and potential insider trading
    • The marketing period must be completed under strict confidentiality to avoid (1) the issuer selectively distributing material information and violating Regulation FD and (2) any investor having and trading on material, non-public information about the issuer.

Attorney Advertising. Prior results do not guarantee a similar outcome. This publication is provided as a service to clients and friends of Harter Secrest & Emery LLP. It is intended for general information purposes only and should not be considered as legal advice. The contents are neither an exhaustive discussion nor do they purport to cover all developments in the area. The reader should consult with legal counsel to determine how applicable laws relate to specific situations. ©2021 Harter Secrest & Emery LLP


This website presents only general information not intended as legal advice. Although we encourage calls, letters and emails from prospective clients, please keep in mind that merely contacting Harter Secrest & Emery LLP (HSE) does not establish an attorney-client relationship between us. Confidential information should not be sent to HSE until you have been notified in writing by HSE that a formal attorney-client relationship has been established. Information sent to us before then may not be treated as confidential by HSE or the court.

I have read this and agree     Cancel

Our website uses cookies. By continuing to use our site, you agree to our use of cookies in accordance with our Privacy Policy.