Multiple choice

Which of the following statements is correct in the context of red herring prospectus?

  1. The price is mentioned in this prospectus.

  2. The number of shares being offered is mentioned in this prospectus.

  3. The amount of issue is mentioned in this prospectus.

  4. Details or price, number of shares and amount of issue are not mentioned in this prospectus.
Reveal answer Fill a bubble to check yourself
D Correct answer
Explanation

"Red-herring prospectus" means a prospectus that does not have complete particulars on the price of the securities offered and quantum of securities offered. The red herring statement contains: purpose of the issue; disclosure of any option agreement; underwriter's commissions and discounts; promotion expenses; net proceeds to the issuing company (issuer); balance sheet; earning statements for last 3 years, if available; names and address of all officers, directors, underwriters and stockholders owning 10% or more of the current outstanding stock; copy of the underwriting agreement; legal opinion on the issue; copies of the articles of incorporation of the issuer.

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