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LSDefine

Simple English definitions for legal terms

preliminary prospectus

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A quick definition of preliminary prospectus:

A preliminary prospectus is a document that companies give to people who might want to invest in their business when they are planning to go public. It tells people about the company's operations and what they are offering. It's also called a "red herring." The company can't make written offers during this time, but they can give out a preliminary prospectus. The document has to include almost all the information that will be in the final prospectus, but it only has an estimated price range, not the final price.

A more thorough explanation:

A preliminary prospectus is a document that companies provide to potential investors during the waiting period of an initial public offering (IPO). It gives information about the company's business operations and the offering.

The Securities Act prohibits companies from making written offers during the waiting period unless the written offer complies with Section 10. However, companies can draft and distribute a preliminary prospectus before the Securities and Exchange Commission (SEC) declares their registration statement effective.

A preliminary prospectus is also known as a "red herring." It contains almost all the information that a final prospectus has, including information about the company's business operations, management, strategies, risk factors, and ownership structure. However, it only includes an estimated price range of the offering price, while the final prospectus has the final offering price.

ABC Company is planning to go public and is in the process of filing a registration statement with the SEC. During the waiting period, ABC Company drafts and distributes a preliminary prospectus to potential investors. The preliminary prospectus contains information about ABC Company's business operations, management, strategies, risk factors, and ownership structure. It also includes an estimated price range of the offering price.

This example illustrates how a preliminary prospectus provides potential investors with information about a company's business operations and the offering during the waiting period of an IPO.

Preliminary injunction | Premarital agreement

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