how a tombstone works
in order to raise money a company s management can sell equity shares in the company through a public offering a tombstone is one component of the disclosure requirements for security offerings required by the securities and exchange commission sec the tombstone is simply an announcement that securities are available for sale tombstone ad vs prospectuswhile a tombstone ad is just a brief announcement alerting investors to the upcoming security sale a prospectus goes into greater detail and gives investors the information they need to make an investing decision when a company issues securities to the public the sec requires that each investor receive a prospectus the prospectus requirement applies to an initial public offering ipo which refers to the first time an issuer sells any type of security to the general public the prospectus requirement also applies to all seasoned issues a seasoned issue also known as a secondary offering is when an established company that already trades on the stock exchange issues new shares of stock for sale a tombstone for a secondary offering is mailed to all investors who already own the security and all secondary offerings are sold using a prospectus the preliminary prospectus doesn t include price information but is used to gauge market interest in the security being proposed the final prospectus however includes price information as well as the number of shares the company will sell the role of underwritersan underwriter is responsible for managing the legal and accounting process of creating a prospectus the prospectus includes the issuer s most recent set of audited financial statements as well as a legal opinion regarding the existence of any pending legal matters a prospectus goes into great detail about a firm s marketing production and sales process and it explains why the company is raising more capital in addition to the underwriters there may be many other members of the syndicate who are brought in to sell the securities to their customers the underwriter s sales force also sells the newly issued securities examples of tombstone informationthe tombstone describes the types of securities that are offered the date they are available the number of shares or bonds to be sold and how the securities can be purchased if a new debt security receives a credit rating that rating can be included in the tombstone a tombstone advertisement gets its name from the black border and heavy black print one typically has in print media the tombstone lists the syndicate members who are involved in the underwriting of the security with the primary members listed in larger type at the top of the advertisement a syndicate member s level of involvement is based on the work the member performs on the security offering and the percentage of the total issue that the member s firm sells to the public if a syndicate member is listed at the top of a tombstone for a popular issuer of stock that document helps the syndicate firm market its expertise to other companies 