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Finance: What is a red herring? (Plus Brochure Rule, Sales Literature and the Preliminary Prospectus) 35 Views

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What is a red herring? A red herring, so named because the cover page is printed in red ink, is a preliminary prospectus for an IPO. In a majority of cases, the S-1 has already been filed, but the SEC has not yet confirmed approval. The red herring contains the bulk of information that would be in the soon to be released final prospectus, and is helpful for promotional purposes and for institutional analysts to commence their due diligence work. The final prospectus may wind up being identical, or the SEC may require additional info or updates in order to approve the S-1, and would thus be revised and released accordingly.

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Transcript

00:00
finance a la shmoop what is a red herring?
00:05
hi I'm red, red-err-ing.. red herring I'm here to tell you about my role in high [Red herring swimming in the ocean]
00:14
finance I'm actually the co-star of an IPO, how so you asked well yes of
00:19
course you asked..what's that, what's my primary job well my primary job is to
00:25
distract that's kind of why I was put on earth here to distract people, fish and [Man on a ship]

00:30
birds from you know other things that's what the red in red herrings do and no
00:35
we're not communists although we all do like the same brand of plankton but
00:40
that's me the fish me the IPO mascot that's a lot more fun...
00:45
I'm the namesake of an investment marketing document I'm the papers that
00:49
get filed with the SEC that outline the details of a new offering an IPO....
00:55
A secondary placement of founder shares after a company has already been public
00:59
a while as well I'm also there for a bond offering, a proposed merger all of [List of what red herrings are used for]
01:04
them need me so why do I exist.... while the goal here is to give investors
01:08
time to really get to know the issue they may want to invest in I don't carry
01:13
all the details not specific pricing, no legally binding asks and just an outline
01:19
of what's being proposed but I'm like 98% done and by not being fully done
01:24
it's easy to amend and tweak and change this and that so that the really uptight [Red herring talking]
01:29
fisherman at the SEC don't get all hacked off if they you know end up
01:33
reeling something in that well they didn't want [Fisherman catches a shark]
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