Equity line of credit (ELOC): a $25 million headline that may unlock far less
An ELOC lets a company sell stock to one investor on demand. The commitment, the registered shares and the usable amount are three different numbers.
What an equity line is
An equity line of credit, usually shortened to ELOC and also called a committed equity facility or equity purchase agreement, is a contract in which one investor agrees to buy a company's newly issued common stock when the company asks, up to a stated dollar commitment and over a stated term.
The company decides whether and when to sell. Each sale is called a purchase, put, advance or draw, depending on the contract. The price is set by a formula, usually a discount to a volume-weighted average price (VWAP) measured over a short window after the request.
Lesson 6 introduced the equity line as a "standby buyer." This lesson shows how to read one in a real filing.
Three numbers that must stay separate
Every ELOC announcement contains at least three large numbers. They answer different questions:
| Number | Question it answers | Is it issued stock? |
|---|---|---|
| Commitment (dollars) | How much could the investor be required to buy over the term? | No |
| Registered shares (count) | How many shares has the company registered so the investor can resell them? | No |
| Usable now (dollars or shares) | How much can actually be drawn today after every limit? | No, until a draw settles |
Only completed draws add shares to outstanding. Each draw should later be reconciled in a Form 10-Q, Form 10-K, or 8-K with share counts and an as-of date.
Why most ELOCs use a resale registration
An ELOC can be registered two ways:
- Primary: the company registers the issuance on Form S-3. SEC staff treat a primary equity line priced off the market as an at-the-market offering under Rule 415(a)(4). A company relying on the baby-shelf instruction (General Instruction I.B.6, Lesson 15) must keep the total issuable under the agreement within one-third of public float, measured when the agreement is signed (SEC Corporation Finance Interpretation 116.21).
- Resale: the company sells shares to the investor in a private transaction, then files a registration statement, often Form S-1, so the investor can resell. The investor is typically identified as an "underwriter" in that resale prospectus.
The resale route avoids the primary-offering structure, which is one reason many small-cap ELOCs appear as resale S-1 filings. Lesson 4 covers resale registration in general. Either way, Lesson 3's rule holds: registration creates a sales path, not shares.
Walkthrough: Polar Power, July 2026
Sources: Form 8-K filed July 28, 2026 and the resale prospectus (424B3) filed August 7, 2026. Figures are quoted or derived from those filings. Checked through October 5, 2026.
Step 1: the headline
On July 27, 2026, Polar Power signed a Common Stock Purchase Agreement with an investor affiliated with a broker-dealer. The company may sell up to $25,000,000 of newly issued common stock over up to 36 months after commencement. The company is not obliged to sell anything.
Step 2: the price and the fee
- Purchases are priced at a 3.0% discount to VWAP for market-open and intraday purchases, and 5.0% for pre-market and post-market purchases.
- A $0.50 threshold price: the company cannot request a market-open purchase if the prior day's closing price is below it.
- A $500,000 commitment fee, equal to 2.0% of the commitment, withheld as 10% of each purchase price until paid.
- A 4.99% beneficial-ownership limit for the investor.
Step 3: the registered shares
The 424B3 registers resale of up to 18,341,893 shares. Compare that with the 3,851,684 shares outstanding as of July 27, 2026:
18,341,893 ÷ 3,851,684 ≈ 4.8× current outstanding
The prospectus states that this number "does not necessarily reflect" the shares the company will actually sell. Treat it as a ceiling on the resale path.
Step 4: the gate that controls today
Nasdaq Rule 5635(d) generally requires stockholder approval for certain non-public issuances of 20% or more of outstanding shares below the "Minimum Price". Lesson 8 treats this as one of five capacity gates. The agreement therefore includes an Exchange Cap of 769,952 shares, which is 19.99% of the 3,851,684 shares outstanding before signing.
The company's own prospectus does the arithmetic: at recent market prices, the cap permits draws of only about $1.3 million, roughly 5.1% of the $25.0 million commitment. It calls the facility "largely unavailable" until stockholders approve.
The cap stops applying if the average purchase price reaches a "Base Price." The 8-K prints that price with square brackets, as $[2.0994]; the later 424B3 states $2.0994 without brackets and explains it as the $1.45 Minimum Price plus $500,000 ÷ 769,952 ≈ $0.6494. The company also discloses that Nasdaq has not confirmed this formulation.
Step 5: the second gate
Authorized shares (Lesson 2; gate 3 in Lesson 8) are a separate limit. Polar Power has 50,000,000 authorized shares. After existing reserves, about 38.4 million remain for the facility, and the prospectus says that if the average purchase price falls below about $0.65, it would not have enough authorized shares to draw the full commitment.
Step 6: the timeline so far
| Date | Filing | Status it establishes |
|---|---|---|
| July 28, 2026 | 8-K + S-1 | Agreement signed; resale registration filed |
| August 6, 2026 | EFFECT notice | Resale registration effective |
| August 7, 2026 | 424B3 | Final resale prospectus |
| September 16, 2026 | Definitive proxy (DEF 14A) | Annual meeting set for October 14, 2026, including a Rule 5635(d) approval proposal for non-public financings and a reverse-split authorization |
The proxy proposal is written broadly ("one or more non-public financing transactions"); it is not limited to this ELOC. As of October 5, 2026, the vote had not occurred. We did not review every later 8-K for draw activity; reconcile actual draws from the next periodic report.
Usable capacity, written honestly
On the facts above, a precise display would read:
- Commitment: $25.0 million (as of July 27, 2026)
- Resale registration: 18,341,893 shares, effective August 6, 2026
- Usable before stockholder approval: about 769,952 shares, about $1.3 million at the prices the company cited
- Drawn to date: unknown until reconciled in a later report
Four lines, four dates or conditions. That is the opposite of "$25 million ELOC = heavy dilution."
Reading the next ELOC
- Commitment, term, and whether sales are at the company's option.
- Pricing formula: VWAP window, discount, any minimum or threshold price.
- Fees: cash or commitment shares, and how they are paid.
- Registered shares versus current outstanding.
- Exchange cap, base-price exception, and any stockholder vote scheduled.
- Authorized-share headroom and ownership blocker.
- Draw reporting: where will actual sales show up, and when?
Remember one line
An ELOC's commitment, registered shares and usable amount are three different numbers; only settled draws change outstanding.