Red Herring – Definition¶

A red herring, or preliminary prospectus, is a legal document that must be submitted to the SEC for approval prior to an initial public offering (IPO). It is prepared by the company that is planning to go public in conjunction with the investment bank syndicate that is underwriting the IPO.

The document includes details about the company, including an explanation of the company’s operations and competitive position, and copies of its financial statements. The document also includes the details of the IPO, including the type of security (common stock, preferred stock, etc.) to be offered, the number of shares to be offered, and the anticipated share price.