Red Herring

Written By
Paul Tracy
Updated July 31, 2021

What is a Red Herring?

A red herring is a registration statement filed with the Securities and Exchange Commission (SEC) by a company that intends to make a public equity offering. The red herring is a rough draft of the company's prospectus and includes a description of the company's business, financial condition, strategy, management, litigation and risk factors.

How Does a Red Herring Work?

A red herring receives its name from the prominent disclosure statement in red letters stating that the company is not attempting to sell its securities prior to the SEC's approval.

Information within a red herring changes either because the SEC requires it or the issuer chooses to alter or add to the existing disclosure. After the SEC approves the document, the red herring becomes the final prospectus and can be used to solicit orders from investors.The definition of red herring on InvestingAnswers

Why Does a Red Herring Matter?

Underwriters often use red herrings to gauge interest in their offerings. They are often the first look investors get at a new issuer.

Activate your free account to unlock our most valuable savings and money-making tips
  • 100% FREE
  • Exclusive money-making tips before we post them to the live site
  • Weekly insights and analysis from our financial experts
  • Free Report - 25 Ways to Save Hundreds on Your Monthly Expenses
  • Free Report - Eliminate Credit Card Debt with these 10 Simple Tricks
Ask an Expert
All of our content is verified for accuracy by Paul Tracy and our team of certified financial experts. We pride ourselves on quality, research, and transparency, and we value your feedback. Below you'll find answers to some of the most common reader questions about Red Herring.
Be the first to ask a question

If you have a question about Red Herring, then please ask Paul.

Ask a question

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 3 million monthly readers.

If you have a question about Red Herring, then please ask Paul.

Ask a question Read more from Paul
Paul Tracy - profile
Ask an Expert about Red Herring

By submitting this form you agree with our Privacy Policy

Don't Know a Financial Term?
Search our library of 4,000+ terms