Preliminary Prospectus

The initial draft registration statement filed with the U.S. Securities and Exchange Commission in advance of an initial public offering.

The process of going public via the initial public offering process is no small feat for a corporation. Similarly, the process of investing in a company that has not yet been tested on a public exchange is no small feat for an investor. As a result, the SEC insists that companies file both preliminary and final prospectus submissions prior to an IPO itself. These documents help to provide material information to prospective shareholders about the company’s business, management, ownership, industry potential, finances and strategic initiatives. It discloses risks related to the issue as well.

While a final prospectus contains formalized details about the number of shares being offered and their pricing, a preliminary prospectus contains fewer finalized details. Instead, one of these documents tells potential investors more about the company itself than about the details of the upcoming offering. In this way, it is used to both educate the public and gauge interest in the upcoming IPO generally.



Friend One: “I was just reading a preliminary prospectus about this tech company I like that is going public. I don’t know what the share prices are going to be, but I’m going to try and get in on the ground floor if I can.”

Friend Two: “Yeah. No one ever went wrong investing in tech stocks.”

Friend One: “Kind-of like how you’ve never gone wrong in terms of your fashion choices, Hammer Pants?”

Friend Two: “Yeah… okay.”