Prospectus

AAA

DEFINITION of 'Prospectus'

A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision.

Also known as an "offer document."

INVESTOPEDIA EXPLAINS 'Prospectus'

There are two types of prospectuses for stocks and bonds: preliminary and final. The preliminary prospectus is the first offering document provided by a securities issuer and includes most of the details of the business and transaction in question. Some lettering on the front cover is printed in red, which results in the use of the nickname "red herring" for this document. The final prospectus is printed after the deal has been made effective and can be offered for sale, and supersedes the preliminary prospectus. It contains finalized background information including such details as the exact number of shares/certificates issued and the precise offering price.

In the case of mutual funds, which, apart from their initial share offering, continuously offer shares for sale to the public, the prospectus used is a final prospectus. A fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management.

VIDEO

Loading the player...
RELATED TERMS
  1. Red Herring

    A preliminary prospectus filed by a company with the Securities ...
  2. Final Prospectus

    1. The final version of a prospectus for a public offering of ...
  3. New Issue

    A reference to a security that has been registered, issued and ...
  4. Corporation

    A legal entity that is separate and distinct from its owners. ...
  5. Public Offering Price - POP

    The price at which new issues of stock are offered to the public ...
  6. Primary Market

    A market that issues new securities on an exchange. Companies, ...
RELATED FAQS
  1. What information should I focus on in my mutual fund's prospectus?

    The U.S. Securities and Exchange Commission (SEC) requires investment companies to provide potential and current investors ... Read Full Answer >>
  2. What information does the SEC require in an investment company's prospectus?

    A prospectus is the document provided by registered investment companies to investors that is meant to assist them in making ... Read Full Answer >>
  3. What are the regulations involved in releasing an ETF on the open market?

    New securities released for sale on the open market are subject to certain regulations enforced by the Securities and Exchange ... Read Full Answer >>
  4. What companies will typically exercise buybacks, and why do they do it?

    In stock market terminology, a stock buyback refers to the repurchasing of shares of stock by the company that issued them. ... Read Full Answer >>
  5. Why should investors pay attention to a corporation's selling, general and administrative ...

    Selling, general and administrative expenses (SG&A) are significant elements of many companies' income statements. These ... Read Full Answer >>
  6. Which is better: A high or low equity multiplier?

    An equity multiplier measures a company's financial leverage by using a ratio of the company's total assets to its stockholders' ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    What's a Prospectus?

    The Security and Exchange Commission (SEC) requires that any company raising money from potential investors through the sale of securities must file a prospectus with the SEC and then provide ...
  2. Professionals

    Warning Signs Of A Company In Trouble

    Don't let your clients go down with ship! Learn how to escape sinking with these tips.
  3. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  4. Savings

    How To Maximize Returns By Choosing The Self-Directed Option

    Make sure your 401(k) plan has the self-directed option to ensure that your retirement is as comfortable as possible.
  5. Mutual Funds & ETFs

    Digging Deeper: The Mutual Fund Prospectus

    The legal jargon of this document can be daunting. Find out how to get to the important stuff.
  6. Charts & Patterns

    Why These May Be the Top 4 Growth Stocks of 2015

    These four stocks have high upside potential in 2015.
  7. Mutual Funds & ETFs

    Pros & Cons Of Bond Funds Vs. Bond ETFs

    Understanding the pros and cons of bond funds and bond ETFs will help you choose the instrument that is best for building your diversified bond portfolio.
  8. Entrepreneurship

    The Story Behind Shake Shack's Success

    A humble Madison Square Park hot dog stand grew to become a gourmet casual food powerhouse in a classic American success story.
  9. Mutual Funds & ETFs

    How Janus Capital Makes Money

    Before investing in Janus, it is prudent to understand how it makes money and what costs detract from shareholder wealth.
  10. Charts & Patterns

    Are These the Top Dividend Stocks of 2015?

    These dividend-paying companies offer a lot more than just dividends.

You May Also Like

Hot Definitions
  1. Adverse Selection

    1. The tendency of those in dangerous jobs or high risk lifestyles to get life insurance. 2. A situation where sellers have ...
  2. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  3. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  4. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  5. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  6. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
Trading Center