What is a Company Prospectus?

Mary McMahon
Mary McMahon

A company prospectus is a document that provides comprehensive information about a company. This information can be used by prospective investors to decide whether they want to invest and what kinds of investment products they want to buy. Companies make their prospectuses available on request to anyone who asks for them and many host versions on their websites to make them easy to access.

Woman holding a book
Woman holding a book

When a company is preparing an initial public offering, it is required to file a prospectus, along with other documents, with regulators. The regulators review the information to confirm that it is accurate and complete. Passing a review does not mean that a company is endorsed by regulators; it simply indicates that the documentation provided is correct and the regulators have approved the company for an initial public offering. A subsequent company prospectus will be released each year with updated information.

There are legal requirements that describe what a company prospectus must include, and these vary by region. As a general rule, the document needs to contain information about the company that would help investors arrive at an informed decision when they decide to invest. It also contains information about the investment products, such as stocks and bonds, that the company makes available.

The document typically goes over the operating history of the company and discusses the current leadership, providing biographies of key people in the company. It also covers the economic status of the company and discusses the larger economic climate the company is operating in. This includes disclosures about economic challenges in the company's industry, as well as larger discussions about the economy. A company prospectus must also discuss any pending litigation against the company and provide a history of major legal events that may be of importance to investors, such as settlements that could impact dividend payments.

This legal filing is a hybrid between an informational brochure designed to get people to invest and a legal disclosure to alert investors to issues of importance. The company prospectus must meet a legal standard in terms of what it contains and how it is disclosed, but there is some latitude to allow companies to market themselves within their prospectuses. Companies can also opt to issue shorter disclosure statements if they are willing to file paperwork with regulators to demonstrate that they are in good financial health, with stable capitalization and no concerns that might impact investment decisions.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a wiseGEEK researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

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Discussion Comments


@sehiggins - Thank you for giving that sound advice. I could not agree more. No one should ever invest in a company if they do not know what they are getting themselves into.

One thing I used to neglect in reading was the biographies of the company leaders. Once, I invested in a company who had a chief executive officer who used to work with a company that I considered immoral. He then brought those same practices that I frowned upon from his old company to the one that I invested in.

Although I actually gained money from the investment, I sold all my stock in the company. I did not want to be a part of a company whose practices I did not agree with. If I had read the company prospectus, I would have known more about its CEO and would not have made the investment in the first place.


Never, ever, buy stock in a company without first looking over its prospectus. I am a seasoned investor, but I have made some poor investment decisions because I did not do proper research on the company before making my investment.

If for some reason you do not understand a piece of information, speak with a trusted financial adviser. Although you have to pay them, the money you can make from making a smart investment decision far outweighs the potentially lost money from a bad one.

At the end of the day, it is your money. If you want it to work for you, you will have to do your homework. This homework starts with reading the company prospectus.


This is a very good overview of what a company prospectus is. I think the article will do a good job in educating those who are looking into investing in company stocks.

I have been working at a financial advisory firm for a long time, so I am very familiar with company prospectuses. Whenever I am working with a client who is new to investing, I always tell them what I think is the most important information listed on a company prospectus. What I am referring to is the discussion of the economic climate of the market that the company does business in.

Looking at the entire economic climate can help you determine how healthy the company's environment is. If for some reason the company is doing substantially better than its competitors, chances are that this performance will not last long. Bad economic times usually affect all companies in the market one way or another.

When you are deciding whether or not to invest in a company, do not just only study the performance of the company itself, but the entire market.

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