A team from Davis Polk & Wardwell advised electric utility Westar Energy on an SEC-registered dribble-out offering of common stock worth up to $500 million.
“It’s a registered offering,” said Menlo Park partner Daniel Kelly Jr. , who led the Davis Polk team representing Kansas-based Westar in the deal announced April 8. “But it’s not underwritten, so you don’t have the selling efforts, you don’t have the road shows and the disruption to the stock,” caused by short sales and other trading maneuvers that typically follow a big stock sale announcement. In a dribble offering, which Kelly says are becoming more common with larger companies, a bank acts as an agent selling shares into the market throughout the day in bits. Kelly cited Bank of America, Delta Airlines and Ford among other big companies that have done this type of stealth offering in the years since the credit crisis put the markets into spasms. The dribble offering is also cheaper, Kelly pointed out.
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