Preliminary Prospectus

Definition:

The preliminary offering document filed with the SEC at launch of an offering of registered securities, pursuant to a Registration Statement. The preliminary Offering Memorandum is its counterpart for a Private Placement. It contains a brief description of the company’s business and financial condition for the benefit of prospective investors. A Preliminary Prospectus has practically all of the information that will be contained within the Final Prospectus, such as information concerning the issuer and the securities, save for the price and number of securities to be issued.

Because of the use of red ink, the Preliminary Prospectus is sometimes referred to as a Red Herring. The Red Herring is used for marketing and Bookbuilding purposes in order to determine investor interest and to price the securities.

Under the JOBS Act, an Emerging Growth Company (EGC) may engage in communications with potential investors that are Qualified Institutional Buyers or Institutional Accredited Investors in order to gauge interest in a securities offering, either prior to or following the filing of a Preliminary Prospectus, without those communications being “offers” in violation of Section 5 of the Securities Act.

See also Offering Document, Offering Memorandum, Prospectus, and Red Herring.

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