(1) Red herring: A red herring refers to a preliminary prospectus that contains all the required information about a company's securities, except for the actual offering price. It is used to gauge investor interest and to generate buzz before the final pricing is determined. The term "red herring" comes from the practice of using a red ink warning on the cover to indicate that the information in the prospectus is not yet complete or final.
(2) Underwriters' spread: The underwriters' spread, also known as the underwriting spread or the gross spread, refers to the difference between the public offering price of securities and the price paid to the issuer by the underwriters. It represents the compensation earned by the underwriters for assuming the risk of selling the securities to investors.
(3) Best efforts underwriting: Best efforts underwriting is a type of underwriting where the underwriters agree to use their best efforts to sell as many of the issuer's securities as possible, but do not guarantee the sale of all the securities. The underwriters are only obligated to purchase the securities that are actually sold to investors. This type of underwriting is commonly used for smaller offerings or for securities that may be harder to sell.
(4) Green shoe provision: A green shoe provision, also known as an overallotment option, is a clause in the underwriting agreement that allows the underwriters to sell additional shares of the issuer's securities if there is strong demand from investors. This option gives the underwriters the flexibility to increase the size of the offering and stabilize the price of the securities by buying back shares from the market if needed.
(5) Shelf registration: Shelf registration is a process that allows companies to register securities with the Securities and Exchange Commission (SEC) in advance without specifying the terms of the offering. This registration enables the company to offer and sell the securities later, when market conditions are favorable, without the need to file additional registration statements. Shelf registration provides flexibility and convenience to companies by reducing the time and costs associated with conducting future offerings.
(6) Rights offering: A rights offering is a type of equity offering in which existing shareholders are given the right to purchase additional shares of the company's stock at a discounted price. This offering allows shareholders to maintain their proportional ownership in the company by purchasing more shares before they are offered to the general public. It provides an opportunity for existing shareholders to increase their investment in the company and for the company to raise capital directly from its shareholders.