What is a red herring propectus ?

Question

This is with regards an offer document during an IPO.

Answer 1

A red herring prospectus is a document submitted by a company (issuer) who intends on having a public offering of securities (either stocks or bonds). Most frequently associated with an Initial Public Offering (IPO), this registration statement MUST be filed with the Securities and Exchange Commission(SEC).

The reason it is called a red herring is due to a disclosure statement printed in red ink on the cover which explicitly states that the issuing company is not attempting to sell its shares.

The red herring statement contains:

   1. purpose of the issue;

   2. proposed offering price range;

   3. disclosure of any option agreement;

   4. underwriter's commissions and discounts;

   5. promotion expenses;

   6. net proceeds to the issuing company (issuer);

   7. balance sheet;

   8. earnings statements for last 3 years (if available);

   9. names and address of all officers, directors, underwriters and stockholders owning 10% or more of the current outstanding stock;

  10. copy of the underwriting agreement;

  11. legal opinion on the issue;

  12. copies of the articles of incorporation of the issuer.

Answer 2

as me

the banking companies uses this form of prospectus

this type of prospectus  valids for one year

if the relevent company issues the same type of securities within one year

then company can use this prospects  but company should attach the changes in econnomic situations and relevent important items happened between this issue nd last issue in a document called memorandum