What it is:
How it works/Example:
For example, let's assume than Company XYZ wants to conduct an initial public offering (IPO) of its shares. It hires an underwriter, which estimates the value of the Company XYZ shares and writes a prospectus that discloses important information about the company to potential investors.
Prospectuses can be very long, and they are legally required. Offering circulars essentially summarize the prospectuses and focus on providing the terms of the offering, including price, size, deadlines, use of funds, and relevant financial information. Though they are most associated with stock offerings, offering circulars are also common in the sale of mutual fund shares.