Respuesta :
Potential investors primarily obtain detailed information regarding a new issue by reading the preliminary prospectus.
A preliminary prospectus refers to the first draft registration statement that a firm classify before proceeding with an opening public offering (IPO) of their securities. The preliminary prospectus consists of information on the company and the deliberated use of proceeds from the offering.
The company lays out the details about the products and services that it is offering, its financial declarations, and details about company management and important shareholders. The prospectus also consists of a legal view and details about the risks of the issue.
The SEC needs that companies print their preliminary prospectus with red ink on the left side of the cover. Therefore, the document has been named as the "red herring" also. A preliminary prospectus contains a bold disclaimer on the cover page that states that the registration is not yet effective. Therefore the information is incomplete and can be changed.
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