Well-known seasoned issuer: Overview, definition, and example
What is a well-known seasoned issuer?
A well-known seasoned issuer (WKSI) is a company that is eligible to use a simplified registration process when issuing securities to the public. The term is specifically used in U.S. securities law and refers to companies that have a large market capitalization and a strong track record of compliance with securities regulations. These companies are considered to have high credibility and access to capital markets, allowing them to bypass some of the more stringent requirements that apply to smaller or less-established companies.
A WKSI is typically allowed to file a shelf registration statement, which enables them to offer securities without having to re-file or get SEC approval for each individual offering, making the process faster and more efficient.
Why is a well-known seasoned issuer important?
A well-known seasoned issuer is important because it allows larger, established companies to raise capital more efficiently. By using the simplified registration process, a WKSI can access public markets with fewer regulatory delays, which can reduce costs and speed up the time it takes to raise funds. This is beneficial for both the company (as they can more quickly secure the capital they need) and investors (who can have more timely access to investment opportunities in established companies).
For businesses, being classified as a WKSI provides greater flexibility and ease in raising capital through public offerings. For investors, it signals that the company is well-established, likely reducing some investment risks.
Understanding well-known seasoned issuer through an example
Imagine a large technology company like Apple, which has a market capitalization of billions of dollars and a long history of regulatory compliance. As a well-known seasoned issuer, Apple can file a shelf registration with the SEC, allowing them to offer stocks or bonds quickly in response to market conditions without needing to go through the typical registration process for each new offering. This means Apple can raise capital more quickly and efficiently compared to a smaller, newer company that would not qualify as a WKSI.
In another example, a well-established pharmaceutical company that meets the qualifications to be a WKSI can more easily tap into public markets to fund research and development by issuing new shares of stock or bonds, streamlining the process and reducing administrative burdens.
An example of a well-known seasoned issuer clause
Here’s how a clause about well-known seasoned issuers might appear in a securities offering document:
“The Company qualifies as a well-known seasoned issuer under the U.S. Securities Act, and as such, is eligible to use a shelf registration process to offer securities to the public without needing to file a new registration statement for each individual offering.”
Conclusion
A well-known seasoned issuer (WKSI) is an established company with a strong market presence and compliance history that qualifies for a more efficient and streamlined process for issuing securities. By simplifying the regulatory requirements, WKSIs can raise capital quickly and reduce costs, benefiting both the company and its investors. Being classified as a WKSI is a significant advantage for large, credible companies looking to access public capital markets.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.