SEC Form 424B4

What Is SEC Form 424B4?

SEC Form 424B4 is the prospectus form that a company must file to disclose information they refer to in SEC Forms 424B1 and 424B3. Rule 424(b)(4) of the Securities Act of 1933 stipulates this.

Understanding SEC Form 424B4

The Securities Act of 1933 helps investors make more informed decisions by requiring securities issuers to complete and file registration statements (including financial and other material information) with the SEC before making their securities available for public purchase. The Investment Company Act of 1940 often requires similar registration statements.

Companies will file SEC Form 424B1 to provide additional information that they omitted in their initial prospectus filing upon registration. SEC Form 424B3 is the prospectus form that the Securities and Exchange Commission (SEC) requires an issuing company to file, detailing the information that resulted in a significant change from previously-supplied information.

The initial prospectus (including both preliminary and final versions) contains key details about an investment offering, such as the exact number of shares or certificates to be issued and the agreed-upon range for the offering price. In the case of mutual funds, a fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management.

SEC Form 424B4 and Initial Public Offerings

Companies file SEC Form 424B4 in tandem with an initial public offering (IPO). An initial public offering is the very first sale of stock that a company makes to the public. (In contrast, a secondary offering is a follow-on deal that occurs after the company’s shares are already trading on the public markets.) Companies often choose to go public, despite some regulatory hurdles and the large amount of work involved, to raise money and create more hype about their products and services. If the deal is successful, going public raises more money than staying private.

Key stages in an IPO include:

  1. The formation of an external initial public offering team, consisting of an underwriter or syndicate of underwriters, lawyers, certified public accountants (CPAs), and SEC experts.
  2. The compilation of highly detailed information, regarding the company or issuer, including financial performance, nuances of operations, management’s discussion of results and goals, and footnotes, such as current or pending lawsuits. All of this becomes part of the company prospectus, which the IPO team circulates among institutional investors for review.
  3. The formal submission of financial statements for audit.
  4. The filing of the company’s prospectus with the SEC and the decision of a date for the offering.