A:

One of the most talked about documents that arises in the process of introducing a new issue is the greensheet. This is an internal marketing document prepared by the underwriter and intended for distribution to brokers and institutional sales desks of the underwriting firm (or underwriting collective). The purpose of this document is to inform salespeople about the security being underwritten so they can market it to the public and get a good sense of which of their clients might be large volume buyers of the new issue.

Greensheets are not intended for public distribution: they are meant to be a rough introduction to the company about to issue the new security, thus they are incomplete and not necessarily accurate. They are meant for the sole use of the employees of the underwriting firm. One of the most important parts of a greensheet is the disclosure - a statement that explains the purpose of the document, the restrictions on its distribution, and the limitations on the information it contains. This disclosure always explains that the information is not a solicitation of securities.

By law, greensheets should contain no information that isn't contained in the prospectus, though they usually contain some sort of comparison of the offering to other companies currently traded on the market.

For more on the initial public offering (IPO) process, read IPO Basics Tutorial, The Murky Waters Of The IPO Market and Don't Forget To Read The Prospectus!

RELATED FAQS
  1. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Answer >>
  2. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
  3. What are examples of risks for all underwriter types?

    Learn about the risks faced by different types of underwriting activity. Explore specific examples of risks faced by insurance ... Read Answer >>
  4. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter as well as the important ... Read Answer >>
  5. How does insurance underwriting differ from investment underwriting?

    Understand the difference between insurance underwriting and investment underwriting, including what types of risks an underwriter ... Read Answer >>
  6. What is real estate underwriting?

    See how underwriters for major lenders scrutinize real estate loans and manage their risk, and learn the origin of the term ... Read Answer >>
Related Articles
  1. Insurance

    What is Underwriting?

    Underwriting is a term most often used in investment banking, insurance and commercial banking. Generally, underwriting means receiving a remuneration for the willingness to pay for or incur ...
  2. Insurance

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  3. Investing

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  4. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  5. Insurance

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  6. Trading

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  7. Insurance

    IPO Flippers And The Companies Who Hate Them (TWTR, ETSY)

    Learn how flipping activity affects an initial public offering.
  8. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  9. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  10. Managing Wealth

    Top 6 Performing IPOs of 2015 (ONCE, GBT)

    2015 has produced a mixed year for initial public offerings, with small biotechs overcrowding the winner’s list.
RELATED TERMS
  1. Greensheet

    A document prepared by an underwriter to summarize the main components ...
  2. Underwriting Fees

    Underwriting fees are monies collected by underwriters for performing ...
  3. Underwriter

    An underwriter is a company or other entity that administers ...
  4. Underwriting Risk

    The risk of loss borne by an underwriter. Underwriting risk generally ...
  5. Underwriting Agreement

    A contract between a group of investment bankers who form an ...
  6. Underwriting Spread

    The spread between the amount underwriters pay an issuing company ...
Hot Definitions
  1. Conflict Theory

    A theory propounded by Karl Marx that claims society is in a state of perpetual conflict due to competition for limited resources. ...
  2. Inflation-Linked Savings Bonds (I Bonds)

    U.S. government-issued debt securities similar to regular savings bonds, except they offer an investor inflationary protection, ...
  3. Peak Globalization

    Peak globalization is a theoretical point at which the trend towards more integrated world economies reverses or halts.
  4. Phishing

    A method of identity theft carried out through the creation of a website that seems to represent a legitimate company. The ...
  5. Insurance

    A contract (policy) in which an individual or entity receives financial protection or reimbursement against losses from an ...
  6. Earnings Per Share - EPS

    The portion of a company's profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator ...
Trading Center