Teaser

Written By
Paul Tracy
Updated June 14, 2021

What is a Teaser?

A teaser is a document that advertises the potential future sale of a security.

How Does a Teaser Work?

The teaser's job is to create demand for a security. Because it is not a prospectus, it does not usually have all the details about the offering; rather, it highlights the most positive aspects of the offering and entices readers to subscribe to the offering later.

To get an idea of the role of the teaser, let’s assume Company XYZ is pursuing an IPO. Before launching the IPO, Company XYZ must see if big institutional investors (or anybody else) want to buy the stock. They create a teaser document, which the investment bank provides to interested parties. Unlike a prospectus, which contains exhaustive detail about the offering, the prospectus is more of an advertising and promotional vehicle.

When the final prospectus is released, the investment bank can take orders from those clients who indicated an interest back when they saw the teaser.

Why Does a Teaser Matter?

The role of the teaser is to make investors aware of the investment rather than the risks of the investment. At that stage, investors would essentially consider the investment "sight unseen." Only after the company issues a prospectus is it protected from claims that it did not fully disclose enough information about itself or the securities in question.

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