Shares of Avis Budget Group Inc (NASDAQ:CAR) fell 3.3% on Monday following the company's announcement that it has established an at-the-market equity offering program.
On Friday Avis Budget executed an Equity Distribution Agreement with ten sales agents, among them BofA Securities, J.P. Morgan Securities and Morgan Stanley, to enable the sale of up to 5 million shares of common stock. The agreement permits the company to sell shares through at-the-market offerings on the Nasdaq Global Select Market or by other methods allowed by law.
Under the terms, Avis Budget will pay the sales agents a commission that will not exceed 2.00% of the gross sales price for each share sold. The company retains discretion over whether to actually issue any shares under the program and may suspend the offering at any time. The firm has stated that net proceeds from any sales will be used for general corporate purposes.
In connection with the offering, Avis Budget filed a shelf registration statement on Form S-3ASR and a prospectus supplement with the Securities and Exchange Commission on Friday. The Equity Distribution Agreement contains the customary representations, warranties and indemnification provisions that govern the relationship between Avis Budget and the participating sales agents.
This planned at-the-market program establishes a mechanism for Avis Budget to raise capital by selling up to 5 million shares into the market over time, subject to its discretion and prevailing conditions. The commission cap of 2.00% sets the maximum fee that will be paid to the sales agents on any shares sold under the arrangement. The filing with the SEC completes the procedural steps associated with putting the offering in place.
Because the company has no obligation to sell shares and may halt the program at any point, the timing and size of any actual issuance remain uncertain. Avis Budget has indicated that any funds raised will be directed toward general corporate purposes rather than specified projects.
Summary: Avis Budget announced an Equity Distribution Agreement to permit up to 5 million common shares to be sold through at-the-market transactions, filing the required SEC documents on Friday. The stock declined 3.3% on Monday following the announcement.