What it means
The phrase has two everyday uses that share one idea: the price is set by the market rather than negotiated beforehand. An at-the-market equity offering, usually shortened to an ATM programme, is an arrangement under which a listed company sells new shares gradually through a broker at prevailing prices.
An at-the-market order is simply a market order, executed at once at whatever price is on the screen. For a company, an ATM programme is a flexible alternative to a traditional underwritten placing.
Instead of issuing a large block at a discount on a single day, the company sells modest amounts when price and trading volume suit it, and it can stop entirely if the shares weaken. The mechanics are straightforward.
The company registers the programme with its regulator, appoints one or more sales agents and sets a maximum value and a time limit. Agents typically earn a commission in the region of 1% to 3% of gross proceeds, materially below the fees charged on a fully underwritten deal.
The trade-off is certainty and market impact. There is no guarantee the full amount will be raised, and steady selling can cap the share price, which is why programmes are normally sized against a modest share of average daily trading volume rather than against the company's funding wish list.
For an investor placing an at-the-market order, speed comes at the cost of price control. In a thin market the fill can land well away from the last quoted price, which is why large orders are usually worked with limit prices instead of thrown in at the market.
In practice
Real-world examples.
Example
A biotechnology company with two years of cash runway registers a $75 million ATM programme and draws on it only when its share price rallies after clinical updates. It raises $31 million over eighteen months and never issues into a falling market.
Example
A property trust uses an ATM programme to fund acquisitions in tranches, matching each drawdown to a specific building purchase. Investors accept the dilution because the proceeds are visibly tied to assets rather than to general funding.
Example
A retail investor places an at-the-market order for 4,000 shares in a thinly traded small company and is filled at an average price 2.3% above the last quote. The experience persuades them to use limit orders for anything outside the largest listed names.
Formula
Calculation
Net Proceeds = Shares Sold x Average Realised Price - Agent Commission - Fixed Costs
A listed engineering group runs an ATM programme and sells 500,000 shares over three months at an average realised price of $24.00.
Gross Proceeds = 500,000 x $24.00 = $12,000,000
Agent Commission at 2% = $12,000,000 x 0.02 = $240,000
Legal, audit and filing costs = $60,000
Net Proceeds = $12,000,000 - $240,000 - $60,000 = $11,700,000
The effective net price per share is $11,700,000 / 500,000 = $23.40, so the all-in cost of the raise is $300,000 / $12,000,000 = 2.5%. Compare that with an underwritten placing priced at a 6% discount with a 3% fee, an all-in cost of about 9%, or roughly $1,080,000 on the same $12 million. The saving is real, but it comes with no certainty that the full amount would have been raised.Case study
Seen in the real world.
Halcyon Grid Systems is a fictional listed manufacturer used here as an illustrative example. It needed around $12 million to fund a factory expansion and faced a choice between a discounted underwritten placing and an at-the-market programme.
The board modelled both. The placing would have delivered certain cash within a fortnight at a total cost of roughly 9%, while the ATM programme offered a cost near 2.5% but no guarantee of raising the full amount inside the construction timetable. Management chose a hybrid: a smaller underwritten placing for the first $5 million, plus an ATM programme for the balance.
In this illustrative outcome the shares drifted lower during the first two months and the sales agent sold very little, exactly as the programme was designed to do. A strong half-year result then lifted the price, and the remaining $7 million was raised in six weeks at prices above the original placing. The fictional lesson is that an ATM programme rewards companies with flexible timetables and punishes those with a hard deadline.
Watch out
Common mistakes.
- Treating an ATM programme as guaranteed funding. Nothing obliges anyone to buy, and a weak share price can leave most of the programme undrawn.
- Confusing an at-the-market order with a fair price. The order guarantees execution, not the price, and in illiquid stocks those two things are very different.
- Sizing a programme against funding needs rather than trading volume. Selling more than a small share of daily volume tends to depress the price and defeat the purpose.
Questions
People also ask.
How does an ATM offering differ from a rights issue?
A rights issue offers new shares to existing holders at a set discounted price, while an ATM sells into the open market at prevailing prices with no pre-emption.
Is an ATM programme dilutive?
Yes, every share issued dilutes existing holders, but the dilution happens gradually and usually at better prices than a discounted block placing.
Should a private company consider this?
No, ATM programmes depend on a liquid public market for the shares, so unlisted businesses raise capital through negotiated placings instead.
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