What is meant by Red Herring in book building of IPO?
Wes asks:
When you apply for IPO under book building process we hear the word RED HERRING (Spell may not be correct)
How is it coined and what is the origin of the word?
When you apply for IPO under book building process we hear the word RED HERRING (Spell may not be correct)
How is it coined and what is the origin of the word?
Related questions:
- in ipo what is fixed price and book building whats different between them? Allene asks: and why its have always two price like globus spirits 135 to 148 what profit or loss why...
- what is the meant of NSE, BSE, MCX, NCDEX ,IPO and MUTUAL FUND? Catrice asks: what is the meant of NSE, BSE, MCX, NCDEX ,IPO and MUTUAL FUND?friends plz give me answers in...
- How do I secure copyright in the Philippines for a book I wrote? Albina asks: I have just finished a book and I'm planning on self-publishing and reproducing it. However, it seems I've...
- Will Face Book, a Internet site, be the next IPO that will be as lucrative as Goggle? Glendora asks: I was watching Esther Dyson on Charlie Rose, and she said she could not say when or if...
- querry about IPO terminology? Russel asks: right now an IPO of DLF is launched i need to ask what is meant by face value...
Its a preliminary prospectus prior to the IPO, with no price or number of shares stated. Its called a Red Herring because it states in red it’s not trying to sell shares, until the registration is approved by the SEC.
“Red Herring Prospectus” is a prospectus which does not have details of either
price or number of shares being offered or the amount of issue. This means that
in case price is not disclosed, the number of shares and the upper and lower
price bands are disclosed. On the other hand, an issuer can state the issue size
and the number of shares are determined later. An RHP for and FPO can be filed
with the RoC without the price band and the issuer, in such a case will notify the
floor price or a price band by way of an advertisement one day prior to the
opening of the issue. In the case of book-built issues, it is a process of price
discovery and the price cannot be determined until the bidding process is
6
completed. Hence, such details are not shown in the Red Herring prospectus
filed with ROC in terms of the provisions of the Companies Act. Only on
completion of the bidding process, the details of the final price are included in the
offer document. The offer document filed thereafter with ROC is called a
prospectus.