SEC Form 424B2

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Updated June 26, 2022

Reviewed by Andy Smith

What Is 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. It is an important part of the initial public offering (IPO) process.

Key Takeaways

SEC Form 424B2 is one of many forms companies must file when making a new offer of securities.
The purpose of SEC Form 424B2 is to provide information such as the price of the security being offered, and its method of distribution.
It is preceded by SEC Form S1, which provides a general overview of the offering, including the background of the company and its management team.
Other methods of fundraising can be less difficult for a company to achieve, but also tend to raise less capital than a successful IPO.

Understanding SEC Form 424B2

SEC Form 424B2 must include information about a company's newly issued securities, including the price set for the securities and their method of distribution. The purpose of the form is to empower investors to make an informed decision on whether to invest in the securities being offered.

Companies are required to file SEC Form 424B2 because of Rule 424(b)(2) of the Securities Act of 1933. This act was created to protect investors by requiring securities issues to file detailed information with the Securities and Exchange Commission (SEC) before selling new securities to the public. There are many other disclosures and preparations that companies need to follow in order to carry out an IPO.

SEC Form 424B2 is part of a series of similar forms that seek to protect investors in different but mutually supportive ways. Examples of these forms and their purposes include:

SEC Form 424A—amendments to previously filed forms
SEC Form 424B1—new information not included in previous filings
SEC Form 424B3—substantive facts or events that arose after the previous filing
SEC Form 425—disclosures related to proposed or upcoming merger transactions

From a company's perspective, other sources of fundraising, such as borrowing from commercial banks or taking on new private investors, can be easier than doing an IPO. However, successful IPOs generally raise the largest sums and can therefore be worth the effort.

Before a company undertakes an IPO, it must put forward financial documents and other critical information to the SEC to be reviewed by investors and other stakeholders. SEC Form S-1 contains general information such as the background and operating history of the issuer and its management team, any risks facing the company, and how the company intends to use the funds raised. In contrast to this general information, SEC Form 424B2 is often used in the event of a delayed offering and discloses transaction-specific data such as the public offering price (POP).

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