Tombstone: The Public Offering Advertisement

What is a tombstone?

A tombstone is a brief written advertisement placed by investment banks underwriting a public offering. It announces that securities are available for purchase and provides basic details about the offering and the underwriting syndicate. The ad typically points prospective investors to the full prospectus for complete disclosure.

Key takeaways

• Tombstones are short, formal announcements of public securities offerings.
• They list the type and quantity of securities, availability date, purchase instructions, and underwriting syndicate members.
• The Securities and Exchange Commission (SEC) requires disclosure documents such as tombstone ads as part of the public offering process.
• The full prospectus contains detailed financial, legal, and offering information; a preliminary prospectus omits final price details, while the final prospectus includes price and number of shares.

How a tombstone works

When a company raises capital through a public offering (an IPO or a seasoned/secondary offering), underwriters prepare and publish a tombstone as one element of regulatory disclosure. The tombstone alerts the market that securities are being offered and identifies the firms authorized to sell them. It does not substitute for the prospectus, which investors must receive to make an informed decision.

Tombstone ad vs. prospectus

• Tombstone: concise announcement with essential facts and syndicate names; often used to direct investors to the prospectus.
• Prospectus: comprehensive document containing audited financial statements, risk factors, purpose of the offering, legal opinions, and final pricing (in the final prospectus).

Preliminary prospectuses (red herrings) are used to solicit interest and do not include final price or share count. The final prospectus supplies those details.

Role of underwriters and syndicates

Underwriters manage the offering process, prepare the prospectus, and coordinate the sale. A syndicate may include multiple firms that share distribution and selling responsibilities. The tombstone lists syndicate members; placement and type size often reflect each member’s level of involvement or the percentage of the issue they sell. Prominent placement on tombstones can serve as a marketing signal of a firm’s underwriting expertise.

Typical information shown

A tombstone commonly includes:
* Type of security (equity or debt)
* Number of shares or bonds offered
* Availability date or offering window
* How and where to purchase the securities
* Credit rating for debt issues (if applicable)
* Names of the underwriting syndicate, with lead managers highlighted

Origin of the name

The term “tombstone” comes from the ad’s traditional appearance in print: heavy black type and a black border that resembled a gravestone.

Why tombstones matter

Tombstones provide a concise, regulatory‑required notice that an offering is underway and identify the firms you can contact for the prospectus. For underwriters, tombstones also function as public recognition of participation in the deal, helping build reputation and business relationships.

Conclusion

Tombstones are a formal, limited‑content advertisement used in the securities offering process to announce availability and list underwriting participants. They complement, but do not replace, the prospectus, which contains the detailed information investors need to evaluate and purchase newly issued securities.