The amount issuable through a S-1 offering isn't restricted by the baby shelf rule. If a company is currently restricted by the babyshelf rule on its shelf filing S-3 and needs capital soon, it has no choice but to either go through the S-1 process for a public offering OR try to find investors for a Private Placement (PIPE).

The drawback of the S-1 process for small caps is that it needs to filed ahead of time and can take time before the SEC gives it EFFECT, by which time the market will have seen the filing for weeks and have negatively reacted to it already. The company will no longer have as much leverage in negotiating a good deal unless it has some good news or upcoming catalyst in hand.