Making Sense of the Prospectus

This chapter highlights various aspects related to an initial public offering (IPO) prospectus, ways to get a copy of the prospectus, and what comprises a prospectus. The prospectus is an investor's best friend as it contains most of the information needed to make investment decision. The different sections of this chapter explain the portions of the prospectus that IPO investors need to understand and to focus on. The first section of the prospectus is called the front page. A prospectus usually has between 20 and 30 sections. The fact that a prospectus lists risks does not, in itself, mean that the IPO is a bad investment. In fact, a prospectus that fails to list any risks would probably never receive SEC approval. Index to consolidated financial statements section of the prospectus includes the full financial statements of the company.