In an IPO, who is a greensheet distributed to and for what purpose?

By Rob Renaud AAA
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!

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