What Is a Red Herring Prospectus?

Redherringprospectus, a type of due diligence at the company's initial public offering (IPO) to gain public trust and approval from government agencies.

Red herring prospectus

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Redherringprospectus, a type of due diligence at the company's initial public offering (IPO) to gain public trust and approval from government agencies.

During the waiting period, the underwriter can provide investors with a preliminary prospectus. The only difference between it and the final formal prospectus is that it does not contain transaction details, that is, there is no price information such as the issue price and underwriting discount. Usually, as soon as the prospectus is filed, the underwriters begin issuing preliminary prospectuses. Since the registration of the securities has not yet taken effect at this time, the SEC requires that this statement must be written in red on the cover (this paragraph is as follows: the information here can be improved or revised. The registration application for this securities has been submitted to the SEC, but It has not yet taken effect. Securities cannot be sold or written purchases can be accepted until the registration takes effect.) The red herring was named for it.