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!

RELATED FAQS

  1. What is the underwriter's job in a real estate transaction?

    Find out why the underwriter may be the most important person in your real estate transaction, and learn what information ...
  2. What are the most unsuccessful tech IPOs of all-time?

    Learn about theGlobe.com, eToys, Shanda Games and Vonage, some of the most unsuccessful tech IPOs of all time, and why their ...
  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 ...
  4. When is an underwriting fee too high on a commercial loan?

    Learn about underwriting fees and when they're too high. If the underwriting fee exceeds 2% of the total loan size, the fee ...
RELATED TERMS
  1. Lloyds Organizations

    An insurance syndicate that bases its organizational structure ...
  2. Volcker Rule

    The Volcker rule separates investment banking, private equity ...
  3. Dog And Pony Show

    A colloquial term that generally refers to a presentation or ...
  4. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
  5. Red Herring

    A preliminary prospectus filed by a company with the Securities ...
  6. Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which ...

You May Also Like

Related Articles
  1. Trading Strategies

    Is Goldman Sachs Still A Winner?

  2. Investing

    Top 10 Largest Global IPOs Of All Time

  3. Investing News

    5 IPOs That Broke The Markets In 2014

  4. Investing Basics

    Alibaba IPO: Why List In the U.S.?

  5. Investing News

    IPO Stinkers: The Biggest IPO FAILS ...

Trading Center