A company prospectus is a document that provides comprehensive information about a company. This information can be used by prospective investors to decide whether they want to invest and what kinds of investment products they want to buy. Companies make their prospectuses available on request to anyone who asks for them and many host versions on their websites to make them easy to access.
When a company is preparing an initial public offering, it is required to file a prospectus, along with other documents, with regulators. The regulators review the information to confirm that it is accurate and complete. Passing a review does not mean that a company is endorsed by regulators; it simply indicates that the documentation provided is correct and the regulators have approved the company for an initial public offering. A subsequent company prospectus will be released each year with updated information.
There are legal requirements that describe what a company prospectus must include, and these vary by region. As a general rule, the document needs to contain information about the company that would help investors arrive at an informed decision when they decide to invest. It also contains information about the investment products, such as stocks and bonds, that the company makes available.
The document typically goes over the operating history of the company and discusses the current leadership, providing biographies of key people in the company. It also covers the economic status of the company and discusses the larger economic climate the company is operating in. This includes disclosures about economic challenges in the company's industry, as well as larger discussions about the economy. A company prospectus must also discuss any pending litigation against the company and provide a history of major legal events that may be of importance to investors, such as settlements that could impact dividend payments.
This legal filing is a hybrid between an informational brochure designed to get people to invest and a legal disclosure to alert investors to issues of importance. The company prospectus must meet a legal standard in terms of what it contains and how it is disclosed, but there is some latitude to allow companies to market themselves within their prospectuses. Companies can also opt to issue shorter disclosure statements if they are willing to file paperwork with regulators to demonstrate that they are in good financial health, with stable capitalization and no concerns that might impact investment decisions.
