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An ATM program can be an attractive alternative to a traditional underwritten offering for companies that have frequent capital needs but don’t need a large influx of capital in a short time. That’s especially true during prolonged periods of capital markets volatility when traditional offerings are especially challenging to execute. As John and Dave shared in the March-April 2023 Issue of The Corporate Counsel newsletter, ATM programs allow issuers to raise money quickly in amounts that can be digested by the market through normal trading activity without adversely affecting the trading price, they’re relatively inexpensive, they don’t require management to devote time to roadshows and they’re flexible, allowing issuers to take advantage of favorable market conditions.

This Goodwin alert notes that the popularity of ATM programs among REITs has surged in recent years, surpassing traditional underwritten offerings in volume. In the fourth quarter of 2024, REITs raised the largest quarterly total on record through ATM programs. The alert goes on to describe some recent developments in the use and structure of ATMs by REITs, some of which are applicable more broadly.

For example, the alert notes that sales syndicates are expanding — sometimes with up to 15 broker-dealers listed as sales agents on the ATM prospectus supplement cover, which helps issuers satisfy the relationship expectations of banks that serve as lenders in their debt syndicates and may motivate these banks to enhance research coverage. But a large syndicate can introduce complexity in an offering structure appreciated for its efficiency. The alert says that issuers often employ one or more of these solutions to address the operational complexity:

– Rotational execution schedules: Many ATM programs adopt formal rotation schedules (daily, weekly, monthly, or quarterly), assigning execution rights to different agents on a rolling basis. These schedules are often established up front (or managed by a lead administrative agent) to ensure equitable participation, reduce conflicts, and accommodate bank availability and investor flows.

– Lead administrative agent model: A lead bank can be designated as a de facto “administrative agent,” tasked with maintaining the rotation calendar, coordinating diligence bring-downs, and overseeing compliance procedures. Although not formally designated in the offering documents, this role somewhat mimics the administrative agent role in a loan facility.

– Coordination role of sales agent counsel: The role of counsel to the sales agents takes on a broader scope in multidealer ATM programs, where even modest changes (e.g., updating a risk factor or tax disclosure) can require iterative sign-off from multiple sales agents’ legal and compliance teams. Typically, a single law firm will represent all named sales agents and serve as the primary point of contact for the issuer and its counsel in managing diligence, documentation, and procedural workflows. This firm is responsible for gathering internal approvals and sign-offs from each participating broker-dealer, often requiring outreach to multiple deal teams and compliance personnel. In-house legal and regulatory staff at the individual banks are looped in on a need-to-know basis, preserving confidentiality and minimizing administrative burden on the issuer.

Some ATMs also include a form of revenue-sharing arrangement that “provides for all agents participating in the program to receive a portion of the sales agent commissions generated by trade executions, often irrespective of whether the particular agent was an executing agent.”  This addresses issues that can arise when the list of sales agents is very long — in which case, some “back of the order” agents won’t get many opportunities to execute trades and may not have the same infrastructure and trading experience, particularly for forward sales, which are now a standard feature of ATM programs for many issuers.

– Meredith Ervine