Red Herring Prospectus (RHP) is a document that is usually submitted to the regulatory body when a company raises money through Public Offering. It comprises information on the company's operations, growth plans and projections, promoters & management details, and risk factors. The regulatory agency may dictate the format.
- Security And Exchange Commission (SEC) vets RHP in the US.
- Security And Exchange of India (SEBI) vets RHP for mainline IPO in India.
Red Herring Prospectus is not a final prospectus. It keeps on changing until approved by the Regulatory body. That is why its name begins with Red Herring, as it may give a false impression.
RHP in IPO
Although the Red Herring Prospectus is not a final prospectus, it is a critical document in an initial public offering (IPO). It contains essential information about the firm that was previously unavailable or dispersed across many media. So, it can help analyze the company for making investment decisions.
Final Prospectus (approved) of a company contains additional information on issue size, issue price, and issue dates.
In India, the term Draft Red Herring Prospectus (DHRP) refers to not the final prospectus. On approval of DHRP by SEBI, it is sent to Stock Exchanges for the issue finalization. Red Herring Prospectus (RHP) is considered a final Prospectus.
How to find Red Herring document
For the USA
Go to SEC site Under FILLINGS Menu > EDGAR - Search & Access > Latest Fillings > Search for form S-1
Go to SEBI site.
Under FILLINGS Menu > Public Issues > Red Herring Documents filed with ROC or Draft Offers Document filed with SEBI.
Even though the RHP is a draft, it might provide vital information about a previously unavailable company. It acts as a knowledge factory about the firm raising capital until the final prospectus is published. Always use the latest or final document for making financial decisions.
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