Question

What is Red Herring in an IPO?

• A. Prospectus
• B. Submission of Form
• C. Funds Generated during IPO
• D. Minimum Offer per Share

Hint:

Think about the document filed before the final price of an IPO share is fixed.

Answer 1

The Correct Option is A

Red Herring is a term used often in the IPO process, so let's check what each option describes.

1. Prospectus: A Red Herring Prospectus is a preliminary prospectus filed with the regulator before an IPO price is fixed, it has all details except the price and quantity of shares, so this matches the term closely.
2. Submission of Form: Filing forms is a routine regulatory step and does not carry the specific name Red Herring, so this option is wrong.
3. Funds Generated during IPO: The money raised in an IPO is usually called issue proceeds, not a Red Herring, so this is incorrect.
4. Minimum Offer per Share: This describes the floor price or lot size, which is a separate concept from the Red Herring document, so it does not fit.

Since the Red Herring specifically refers to the preliminary prospectus filed before the final price is set, option A is correct.

Let's summarize:

• A Red Herring Prospectus is the preliminary document filed before an IPO's price band is finalized.

So the answer is option A.