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Joshua Cho
Initial public offerings, or "IPOs," are a special breed of investments. And with this comes its own vocabulary.
For one thing, institutional investors comprise the real market for these deals. These investors are usually on the inside track after being given a "road show" where the company going public touts itself as something that should be bought into. More sensitive information, such as the underwriter's projections, are usually shared during the road show, as well. Reporters are never invited to these presentations.
Most individuals don't invest in IPOs. And most experts will tell individuals not to because the risk of losing money is so high in the "aftermarket."
But if one were interested in investing in a company that's coming to public markets for the first time, one would be advised to read that company's "S-1," also known as the "registration statement," which contains the company's "prospectus." Preliminary versions of the prospectus are further defined as a "Red Herring."
However, you'd be ill-advised to actually call the company directly to obtain any information due to the Securities and Exchange Commission's mandated "quiet period."
Here's a short list that defines all the words in quotes:
* Aftermarket: The broad market where a company's stock is traded.
* IPO: Stands for initial public offering. The first time a company offers stock to the public.
* Prospectus: A document that details the company's operations. In many instances it's the first time detailed statements of financial performance are made public.
* Quiet period: Mandated by the Securities and Exchange Commission for companies that have filed an S-1. Begins the day the S-1 is filed until 25 days after the IPO.
* Red Herring: Preliminary versions of the prospectus. So called because of the red type on the cover's left hand margin, which states that the information therein is subject to change.
* Registration statement: Technically referred to as an S-1. Required by the SEC for any company that intends on going public. Contains details of the company; includes the prospectus.
* Road show: A presentation given by a company intending to go public, which serves to build demand for the company's shares.
* S-1: The technical term for "registration statement."
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