At-the-market offerings may be primed for even more growth in 2018, after a record year propelled by ONEOK Inc., BGC Partners Inc., and other companies seeking low-cost capital.

These offerings let companies decide when to issue additional shares at the prevailing market price. Companies listed on U.S. exchanges announced 205 ATM offerings valued at a collective $27.82 billion last year, topping the $23.01 billion value of the 189 offerings in 2016, according to an analysis by Bloomberg Law.

ATMs may be particularly attractive this year because of erratic market conditions. ATM program values spiked to more than $18 billion in 2009, in the wake of the 2008 financial crisis. Announced ATM offerings totaled $323 million in 2008.

ATM offerings work well in most market types, but perform best during two in particular: when volume and prices are up across the board, and during periods of volatility, Dean Colucci, a partner with Duane Morris LLP and a former investment banker, told Bloomberg Law.

"In a highly volatile market, where you can’t do a follow-on deal because prices are jumping around, it becomes the only way of raising capital," Colucci said. ...

"It provides a very efficient way for a company to raise capital," Colucci said. "It gives control to the issuer. They pick the timing, they pick the amount, and they pick the price."

How Are They Used?

ATM offerings, a type of "follow-on" to an initial public offering, are tied to a company’s shelf registration statement filed with the Securities and Exchange Commission. The statement permits the issuance of shares through various offerings for three years. ...

"The beauty of it is, the product can be customized to fit the need of the client," Colucci said. For highly liquid issuers trading millions of shares daily, it’s "very easy to raise tens and in some cases hundreds of millions of dollars."

"As some [chief financial officers] like to say, it’s just another arrow in their capital-raising quiver," Colucci said.

About 75 percent of all ATM offerings from 2008 to 2017 were valued between $1 million and $100 million, according to Bloomberg data. But programs worth between $500 million and $1 billion are common. ...

Who Uses Them and Why?

ATM offerings are used in numerous industries, but have become especially popular among companies in industries that undertake frequent fundraising, including life sciences and real estate. ...

Duane Morris advised the second-most [ATM deals in 2017] with 39. ...

The current push to bypass financial institutions may also be contributing to the rise in ATM offerings, Colucci, of Duane Morris, said. "It levels the playing field with the issuer versus the buyer versus the investment bank,” he said, adding that he expects ATM offerings are “only going to continue to gain traction."

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