Legal Definitions - well-known seasoned issuer (WKSI)

A well-known seasoned issuer (WKSI) is a classification given by the U.S. Securities and Exchange Commission (SEC) to certain large, financially stable companies. This designation allows these companies greater flexibility and speed when raising capital by selling securities to the public in the U.S. markets.

To qualify as a WKSI, a company must meet strict criteria, demonstrating its reliability and significant presence in the market:

• Consistent Reporting and Financial Health: The company must have consistently filed its periodic reports with the SEC on time for at least 12 months and must not have defaulted on any significant debt or long-term leases.
• Substantial Market Presence: The company must meet both of the following financial thresholds: it has over $700 million in 'public float' (the value of its shares held by the public, excluding insiders) and it has issued more than $1 billion in principal of non-convertible debt securities in primary offerings.
• Good Standing: The company must not be an 'ineligible issuer.' This means it hasn't recently failed to meet its reporting obligations, isn't a shell company, hasn't recently filed for bankruptcy, and hasn't been convicted of certain serious offenses.

The WKSI designation provides several significant advantages:

• Flexible Communication: WKSIs face fewer restrictions on what they can say publicly about a potential offering before formally filing all paperwork with the SEC. This allows them to communicate more freely with investors through oral offers or written materials (known as 'free writing prospectuses') early in the process.
• Faster Access to Capital: WKSIs benefit from 'automatic shelf registration.' This means they can file a registration statement (often called a 'shelf registration') that becomes effective immediately, without waiting for SEC review. This allows them to quickly offer and sell securities 'off the shelf' whenever market conditions are favorable, without needing to file new, lengthy registration statements for each offering.
• Streamlined Disclosure: When using automatic shelf registration, WKSIs do not need to provide as much specific detail in their initial registration documents, such as the exact amount of securities they plan to sell or the names of all selling shareholders, until closer to the actual sale.

Examples of a Well-Known Seasoned Issuer (WKSI)

• GlobalTech Inc. is a well-established technology company with a market capitalization exceeding $1 trillion and a consistent history of timely financial reporting to the SEC for decades. GlobalTech has also issued billions in corporate bonds over the years to fund its expansion. When GlobalTech decides to raise capital for a new acquisition, its WKSI status allows it to quickly announce its plans and begin discussions with potential investors without the usual pre-filing restrictions. Its shelf registration for future stock or bond sales is already active, enabling it to launch an offering within days, taking advantage of a favorable market window.

  This illustrates how a company meeting the significant public float and debt issuance criteria, along with a perfect reporting history, can leverage the WKSI benefits of flexible communication and automatic shelf registration for rapid capital raising.

• Consider PharmaLife Corp., a leading pharmaceutical company with a public float of $800 million and a track record of issuing over $1.5 billion in non-convertible debt to fund its extensive research and development. PharmaLife consistently files its quarterly and annual reports on time and has never been involved in any disqualifying legal issues. If PharmaLife needs to raise funds for a new drug trial or to acquire a smaller biotech firm, its WKSI status means it can use its existing 'shelf' registration to issue new shares or bonds almost instantly. This agility is crucial in a fast-moving industry where timing can significantly impact funding success and competitive advantage.

  This demonstrates how a company fulfilling both the public float and debt issuance thresholds, coupled with a strong compliance record, benefits from the speed and efficiency of automatic shelf registration to fund ongoing operations and strategic initiatives.

• Evergreen Brands, a global consumer goods conglomerate, has a public float of $950 million and has issued $1.2 billion in non-convertible bonds over the last few years to expand its manufacturing facilities worldwide. Evergreen Brands has never defaulted on its debt and has a perfect record of SEC filings. When the company identifies an opportunity to refinance existing debt at lower interest rates, its WKSI status allows it to prepare and execute a new bond offering with minimal regulatory delay. The ability to use free writing prospectuses also helps them gauge investor interest efficiently before committing to the full offering process.

  This example shows how a large, stable company meeting the financial and reporting criteria can utilize its WKSI status for strategic financial management, benefiting from both the automatic shelf registration for quick refinancing and the flexible communication rules to assess market demand.