What is an Offering Memorandum?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 04 September 2019
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Offering memorandums are legally binding documents that are used to provide important information relevant to the process of a financial transaction. Sometimes referred to as a prospectus, an offering memorandum may be required when offering stocks to investors, or selling real estate. In any situation, the document will include data that is required by law to be supplied to investors, ensuring they have sufficient information to make an informed decision about making the purchase.

In terms of investing in stocks and other securities, an offering memorandum features important information about the entity that issued the securities. For example, a corporation offering shares to the general public will create a document that addresses the scope of the company’s operations, the management of the business, and the reason behind the offering itself. This helps the investor to gain information about the nature of the company, the prospects for future growth, and an idea of what type of return to expect from the securities if they are purchased.


The use of an offering memorandum in real estate circles is less common, but still considered essential in deals where the idea is to invest in property with an eye of making a profit. With this application, the offering memorandum will address issues such as the equity inherent in the property, the general condition, any outstanding liens, and the potential for the property to increase in value over time. An equity offering memorandum can help investors who want to buy low, invest a small amount in enhancing the property, then sell at a profit assess the potential to make money in the venture, based on location and other relevant factors.

Various types of investment funds make use of this type of legal document. There are examples of hedge fund offering memorandums as well as confidential offering and private equity offering memorandums. While the particulars may differ slightly based on current laws and regulations, just about any type of fund offering memorandum will include the risks involved with the transaction as well as detailed information about the terms and conditions that will govern the purchase of the investment.

In some countries, investors who receive the memorandum are required to submit what is commonly known as a subscription agreement. This document formally establishes the interest of the investor in the offering, and serves as a means of qualifying who actually has access to the information contained in the offering memo. Once the agreement is in place, it is possible to obtain a copy of the offering memorandum that is filed with securities regulators or other authorized personnel.


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