DEFINITION of SEC Form 424B2
SEC Form 424B2 is the prospectus form that a company must file if it is making a primary offering of securities on a delayed basis. SEC form 424B2 must include information about the securities being offered, including the price set for the public offering, and the method of distribution.
BREAKING DOWN SEC Form 424B2
Companies are required to file prospectus form 424B2 in accordance with Rule 424(b)(2) of the Securities Act of 1933. The act was created to help investors make informed decisions by requiring securities issuers to complete and file registration statements (including financial and material information) with the Securities and Exchange Commission (SEC) before making an issue available for purchase by the public. Often registration statement filings required under the Securities Act of 1933 are also registration statements under the Investment Company Act of 1940.
SEC Form 424B2 and an Initial Public Offering (IPO)
Before a company undertakes an initial public offering (IPO), it must pull together its financial documents and other critical company information for investors and other stakeholders. Form S-1 contains detailed information such as background on the issuer, including bios of management, operating history, and any risks facing the company; it also contains the use of offering proceeds (whether for new investments, given to selling shareholders, pay down debts, or research and development), a description of the specific types of securities being issued (such as warrants), and any associated tax considerations. In contrast, SEC Form 424B2 is often used in the event of a delayed offering and discloses transaction-specific data, such as the public offering price or POP.
In an IPO, much of the company’s information is being made public for the first time and is therefore usually richer in details than what’s disclosed in a secondary offering. Despite the enormous amount of work involved prepping for an IPO, many companies decide to go public as it raises a great deal of money that allows them to grow and expand. An IPO can also give a company a large boost in publicity. While private companies have many options to raise capital, including borrowing, finding additional private investors, or via an acquisition; by far, successful IPOs raise the largest sums.
Several of the largest and most high-profile IPOs to date include: