What Is an Investment Banking Tombstone?
Investment banks predominantly help corporates raise capital through various channels. Usually, a company that wants to raise capital resorts to a public offering through which its shares are sold to investors. However, investors need to know basic details about the financial instruments/securities/shares under consideration before a public offering. An ‘investment banking tombstone’ is created by the respective investment bankers to resolve this issue. It also helps investment bankers showcase their capabilities.
Read on to know more.
Investment Banking Tombstone: Definition
Investment bankers involved in underwriting an issue prepare an advertisement for an upcoming public offering. This written advertisement, termed a tombstone, contains general details about the securities to be sold. It can be considered an invitation to investors for an upcoming security sale. Drafting and distributing an investment banking tombstone before a public offering have been made compulsory by the regulatory authorities.
A tombstone describes the type and number of securities that would be on sale to investors. This written document contains security-purchase guidelines, date of sale and credit rating of the security. It also includes the name(s) of the authorised personnel involved in the security sale. One can also consider it as a formal announcement to investors about a security sale.
Is a Tombstone Different From a Prospectus?
A tombstone includes general details about security sale, whereas a prospectus delves deeper and provides detailed information about the security under consideration. A prospectus also contains an overview and principles of the company selling its securities through a public offering. Investors use a prospectus to make an informed decision before buying securities. Unlike a prospectus, a tombstone is only a formal invitation to investors about a public offering.
Role of Investment Bankers in Tombstone Creation
Investment bankers, involved in raising capital for a firm, can assist in creating a tombstone. The underwriters are responsible for creating an informed tombstone, which is shared with investors. They also direct potential investors to the company in need of capital so they can obtain the required details through a prospectus. The prospectus help the investors make an informed decision.
The primary members involved in underwriting securities are listed on the top section in a tombstone. The tombstone should be published as per the disclosure requirements before a public offering.
Conclusion
A tombstone not only invites investors for a public offering, but also informs them about the type and number of securities under sale. Investors get to know about the availability of a security (date) and purchasing methods.
An effective investment banking tombstone is a prerequisite for a successful public offering.
