Red Herring

This is the term of art for the preliminary prospectus. It gets its name from the printed red disclaimer on the left side of the prospectus. Red herrings contain a proposed offer range and a share count.

Registration Statement

To go public, a company must file a registration statement with the SEC. This document, filed electronically via EDGAR, contains a description of the company, its management and its financials. The material is reviewed by the SEC for its completeness, amount of disclosure and its presentation of accounting information. The IPO cannot go forward until the SEC is satisfied with the document. In some cases, where the SEC takes issue with a company’s accounting methodology, for example, the registration process can take months.

Regulation A+

Authorized by the JOBS Act and implemented in 2015, Regulation A+ provides companies with an easier route to raise funding – up to $75 million. This can be achieved through either a private or public offering. Unlike Regulation D, private offerings under Reg A+ can raise funds from all Americans, not just large accredited investors. Similarly, IPOs under Reg A+ (sometimes called "Mini IPOs") typically rely on more individual investors, and have lower fees and regulatory requirements than standard IPOs. Another key advantage is that companies can first test the waters with widespread publicity campaigns before committing to an offering. They are still required to file a version of a preliminary prospectus with the SEC under form 1-A. While many smaller companies choose to go it alone, boutique investment banks (e.g. Tripoint Global) and law firms have entered the niche space. Consumer brands and consumer-facing tech companies have been early adopters of Reg A+, since they can turn a large customer base into an investor base. However, there are obvious downsides to allowing all investors to make venture-stage investments in startups, while at the same time lowering their regulatory requirements. Caveat emptor.


Stocks of the moment that are in demand more because of positive group momentum than underlying fundamentals. Often these stocks sell off once positive momentum tires and investors move on to the next hot area. Generally, these stocks lack the growth or tangible results that distinguish market leaders from me-too companies. They are prime candidates to become fallen angels.

Reverse LBO

Private equity firms may acquire a company using debt in a leveraged buyout (LBO). When the owners decide to use the IPO market to reduce the company’s debt load, the process is called a reverse LBO, because they are replacing debt with equity. Investors are often attracted to a reverse LBO's straightforward story: improve cash flows by paying down debt. However, IPO investors should be cautious of "quick flips" where the PE firm exits only a year or two after the LBO. In addition, IPO investors should not bail out a PE firm that has loaded a company with too much debt.


When a company launches its IPO, management schedules a nationwide series of lunches, breakfasts and dinners to make its pitch to institutional investors. These presentations are organized by the lead manager and are held at hotel dining rooms in major cities. For particularly hot IPOs, these presentations attract hundreds of investors who are jammed 10 or 12 to a table. Management’s presentation is typically similar to the net roadshow, and might even use the same slides. However, a live roadshow will almost always include a Q&A session.


This is an IPO of independent companies in the same industry that merge into a single company at the time of the offering. Mostly used in fragmented industries, the approach has been applied to equipment rental firms, floral distributors, office products distributors, travel agencies, temporary staffing organizations, dental practices and car dealerships.