The COVID-19 pandemic has resulted in severe market volatility in U.S. capital markets and the loss of significant equity value for many U.S. public companies. As a result, many companies may be at risk of losing their status as well-known seasoned issuers ("WKSIs") under the federal securities laws. A company qualifying as a WKSI may file an automatic shelf registration statement with the Securities and Exchange Commission ("SEC") allowing it to register an unspecified amount of securities and have such registration statement deemed effective upon filing without waiting for an SEC review. A WKSI is defined as a company that, among other things, as of a determination date, had a public float of at least $700 million. The "determination date" that is used to assess a company's WKSI eligibility may be any date within 60 days before the filing of (i) the shelf registration statement; (ii) the company's most recent post-effective amendment to a previously filed shelf registration statement; or (3) its most recent Annual Report on Form 10-K or Form 20-F (in the event the company has not filed a shelf registration statement or a post-effective amendment for 16 months). As a result, a company does not need to have a $700 million public float at the time its automatic shelf registration statement is filed so long as it did reach such threshold within the 60-day period prior to the filing. This assumes that the issuer would not qualify as a WKSI under the debt issuance prong.
Recently fallen WKSIs with shelf registration statements that expire this year should consider filing an automatic shelf registration statement while they still remain within this 60-day period. A former WKSI may continue to sell securities registered under a previously filed automatic shelf registration statement until the date on which its Form 10-K for 2020 is required to be filed (assuming that as of the filing of its most recent 10-K this year it qualified as a WKSI). At that time, the former WKSI will be required to amend its automatic shelf registration statement by filing a post-effective amendment on Form S-3 to convert the automatic shelf registration statement to a regular shelf registration statement. Given that WKSIs also are entitled to other benefits and accommodations, including certain communications related safe harbors, the issuer should consult closely with counsel.
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