5. The Going-Public Process 49

SEC rules require that this prospectus substantially conform to the requirements of the 1933 Act and that the cover page bear the caption “Preliminary Prospectus.” Prior to the full implementation of EDGAR, this language was required to be printed in red ink (hence the term red herring). The following statement must be printed on the cover in type as large as that generally used in the body of the prospectus:
{Information contained herein is subject to completion or amendment. A registration statement relating to these securities has been filed with the Securities and Exchange Commission. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. This prospectus shall not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of these securities in any State in which such offer, solicitation, or sale would be unlawful prior to registration or qualification under the securities laws of any such State.}
SEC rules also stipulate that the preliminary prospectus may omit the offering price, underwriting discounts or commissions, discounts or commissions to dealers, amount of proceeds, or other matters dependent on the offering price.
Tombstone ads
Companies may place tombstone ads in various periodicals announcing the offering and its dollar amount, identifying certain members of the underwriting syndicate, and noting where and from whom a copy of the company’s prospectus may be obtained. Tombstone ads are not intended to be a selling document; their main purpose is to assist in locating potential buyers who are sufficiently interested in the security being advertised to obtain a statutory prospectus. Tombstone ads may be published once the registration statement has been filed; however, typically they are not published until after the effective date of the registration statement.
Financial analysts’ meetings or “road shows”
For potential investors to learn about the company, your underwriter will arrange meetings, called “road shows,” with financial analysts, brokers, and potential institutional investors. These meetings are generally attended by your company’s president and key management (such as the chief technical officer or chief financial officer) and may take place in many different locations throughout the country or the world, if you have an international offering.
It is vital that your management team be well prepared for these meetings. This can not be emphasized enough. You should not assume that the prospectus is able to “stand on its own” — anticipate potential questions concerning
specifics on your company and its plans and know the answers, as the credibility projected by your management team in its presentation and their ability to respond to potential investors’ and brokers’ questions will be a major influence in the success of the offering.
PricewaterhouseCoopers LLP Roadmap for an IPO

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