Every term below shows up in the offering prospectuses, 8-Ks, and convert exhibits you'll read on small-cap dilution trades. Bookmark this page and use it as a decoder ring.
Cap-structure terms
Affiliate: an officer, director, or 10%+ holder. Sales of restricted stock by affiliates are capped at the greater of 1% of shares outstanding or 4-week average weekly volume.
Float: shares actually available to trade — total outstanding minus restricted insider holdings.
MVPHS (Market Value of Publicly Held Shares): float × highest closing price in last 60 days. Drives baby-shelf eligibility.
Authorized shares: the ceiling set by the corporate charter. Companies need a shareholder vote (DEF 14A) to raise it.
Offering vehicles
ATM (at-the-market): broker-dealer drips new shares onto the open market up to a registered cap. Filed as a 424B5 under an effective S-3 shelf.
RDO (registered direct offering): shelf take-down placed directly with a few named institutions at a negotiated discount.
PIPE (private investment in public equity): unregistered share or debt sale to a private investor group. Requires a follow-up S-1 or S-3 to make shares tradable.
Equity line of credit: standing agreement (usually Lincoln Park or Aspire) to issue shares at a VWAP discount, capped at ~30% of daily volume.
Shelf registration (S-3/F-3/F-10): 3-year authorization to raise up to a registered dollar amount via take-downs.
Underwritten follow-on / bought deal: bank buys the entire block at a 7% discount and resells.
Warrant and convert terms
Exercise price: cash price the warrant holder pays to acquire a share.
Warrant coverage: warrants per share in an offering. 100% coverage = one warrant per share sold.
Pre-funded warrant: $0.01 exercise warrant used to dodge the 10% affiliate threshold.
Cashless exercise: surrender warrants to receive shares without paying the exercise price; specific conditions vary.
Full ratchet (down-round protection): if the company later issues at a lower price, the exercise/conversion price resets to that lower price.
Conversion price: dollar amount used to compute shares issued on convert: shares = principal ÷ conversion price.
Variable rate / death spiral: convert with conversion price tied to a discount of recent VWAP. Self-reinforcing dilution.
Process and regulatory terms
EFFECT: SEC sign-off on a registration statement. Releases at 6:00am ET in bulk. Required before S-1 offerings can price and before resale shares can trade.
Registration: SEC process to make restricted shares freely tradable.
Rule 144: exemption allowing restricted shares to be sold without registration after a holding period.
Baby shelf (IB6) rule: caps shelf raises at ⅓ of float value for sub-$75M float companies in any 12-month window.
Placement agent / underwriter: the bank facilitating the issuance. Placement agent on RDOs (3% fee, no risk); underwriter on bought deals (7% discount, principal risk).
Form 144: filing required when an affiliate sells more than 5,000 shares or $50,000 of restricted stock in a 90-day window.