Question 36

The initial public offering (IPO) price is not included in a “red herring” or preliminary prospectus.

In a “red herring” or preliminary prospectus, the initial public offering (IPO) price is typically not disclosed as it is subject to change until the final prospectus is issued. This document provides preliminary information about the company and its offerings without committing to a specific IPO price.

A) Issue size

The issue size is included in a “red herring” or preliminary prospectus as it provides potential investors with details on how many shares will be offered and the total amount of capital the company aims to raise. This information is crucial for investors to assess the scale of the offering.

B) Financial statements

Financial statements are also included in a “red herring” or preliminary prospectus. They provide insights into the company’s financial health and performance, which helps investors make informed decisions about the investment opportunity.

C) Intended use of the funds

The intended use of the funds is outlined in the “red herring” or preliminary prospectus, as it informs investors about how the company plans to allocate the capital raised from the offering. This information is vital for understanding the company's strategic direction and growth plans.

D) Initial public offering (IPO) price

The initial public offering (IPO) price is not included in a “red herring” or preliminary prospectus. This is because the final price is determined closer to the offering date based on market conditions and investor demand, making it inappropriate to disclose in the preliminary document.

Conclusion

The initial public offering (IPO) price is definitively excluded from a “red herring” or preliminary prospectus, while the other options—issue size, financial statements, and intended use of funds—are essential components of the document. This distinction is critical for investors as they navigate the offerings and assess the potential investment opportunities presented by the company.