Time of sale prospectus: Overview, definition, and example
What is a time of sale prospectus?
A time of sale prospectus is a document that provides detailed information about a securities offering at the time it is sold to potential investors. This prospectus is typically used in connection with initial public offerings (IPOs), secondary offerings, or other securities transactions, and it includes all necessary information about the offering, including the company’s financial status, the risks involved, and the terms of the securities being offered. The purpose of the time of sale prospectus is to give investors the information they need to make an informed decision at the time of purchase.
For example, during an IPO, a company will provide a time of sale prospectus to potential investors, detailing the price of the shares, how the funds will be used, and the risks associated with investing in the company.
Why is a time of sale prospectus important?
A time of sale prospectus is important because it ensures that investors have access to the most current and accurate information about the securities they are purchasing at the moment of sale. It is a key tool in protecting both the issuer and the investor, as it helps ensure that the offering complies with securities laws and regulations, such as those imposed by the U.S. Securities and Exchange Commission (SEC). By providing a comprehensive overview of the offering, the time of sale prospectus allows investors to assess the risks and benefits of their investment before making a decision.
Understanding time of sale prospectus through an example
Let’s say a company is launching an IPO and offers 1 million shares to the public at a price of $20 per share. At the time of sale, the company provides a time of sale prospectus, which includes the offering price, the company’s financial statements, an analysis of the business model, the risks of investing, and how the company plans to use the funds raised. This prospectus helps investors understand what they are purchasing and the risks involved in the investment.
In another example, a company may issue additional bonds to raise capital, and at the time of sale, the company provides a time of sale prospectus to potential bondholders. This document outlines the terms of the bonds, interest rates, and the company's creditworthiness.
An example of a time of sale prospectus clause
Here’s how a time of sale prospectus clause might appear in a securities offering document:
“The Company will provide a time of sale prospectus to all prospective investors, containing detailed information about the offering, including the price, terms, risk factors, and financial information as required by applicable securities laws.”
Conclusion
A time of sale prospectus is an essential document in the securities offering process, providing investors with the information they need to make informed decisions about their investments. It helps ensure transparency and compliance with legal requirements, offering a comprehensive overview of the offering’s terms, risks, and benefits. Including this prospectus in the offering process safeguards both issuers and investors, promoting fairness and informed decision-making.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.