SEC Form 424B5

What Is SEC Form 424B5?

SEC Form 424B5 is a supplemental prospectus a company must file with the Securities and Exchange Commission (SEC) prior to sending off an initial public offering (IPO) — would it be a good idea for it wish to make changes to the essential offering information recently stated in before documents.

Understanding SEC Form 424B5

SEC Form 424B5 commands companies to explain or update securities offering information before going public. These follow-up prospectuses assist investors with assessing companies they are considering investing in, so they can settle on lucid choices.

The form is generally used to explain data initially given by Form 424B2, including the expected opening share price of the stock, the number of overall shares the company plans to issue, and whatever other appropriate data that might influence an investor's decision on the choice about whether to invest in the company.

In the event that a company perceives the need to explain existing information, it must organize any changes in Form 424B5, then file the document inside two business days of deciding such changes are considered significant. All of this must happen prior to the date of the IPO.

Requirements for SEC Form 424B5

SEC Form 424B5 must be filed as per Rule 424(b)(5) of the Securities Exchange Act of 1933. This legislation was passed to guarantee that registration statements and prospectuses contain the risk and reward metrics consumers need to go with informed investment decisions about new securities offerings.

The act holds directors, lawyers, accountants, underwriters, and some other signatories of registration statements commonly at risk for false and deceiving statements held inside these documents. Any party that obstinately disregards the Act of 1933 is subject to a five-year jail sentence, a $10,000 fine, or both.

These tough punishments were developed in the wake of the stock market crash of 1929, which was generally brought about by an extreme lack of market transparency. By animating increased disclosure in financial statements, the act expects to reduce securities fraud and forestall future fiscal emergencies.

SEC Form 424B5 is many times drafted by the underwriting firm that dispatches a company's initial public offering (IPO), which is normally an investment bank.

Illustration of SEC Form 424B5

On May 18, 2016, Tesla Motors, Inc. issued a Form 424B5 filing when it augmented the number of common stock shares it was rolling out for its IPO. The actual wordage in the document incorporated the following sentences:

"We are offering 6,800,000 of the shares to be sold in the offering. The selling stockholder recognized in this prospectus supplement is offering 2,777,901 extra shares. We won't receive any of the proceeds from the sale of the shares being sold by the selling stockholder. Our common stock is traded on the Nasdaq Global Select Market under the symbol "TSLA." The last reported sale price of our common stock on May 17, 2016, as reported on Nasdaq, was $204.66 per share."

Features

• SEC Form 424B5 is a revised prospectus addendum that a company must file when it understands that beforehand stated offering information is erroneous or fragmented.
• SEC 424B5 most frequently follows up Form 424B2, which contains the initial round of offering data.
• Companies must file Form 424B5 as a provision under the Securities Exchange Act of 1933.