Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Offering Circular

What it is:

An offering circular is an abbreviated prospectus.

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.

Why it Matters:

Offering circulars exist to raise interest in an offering. As the "Cliff Notes" versions of prospectuses, they provide the highlights to potential investors, although these investors should read the actual prospectus in order to understand fully the nature of the offering.