Definition
A tombstone ad is an advertisement placed in newspapers by investment bankers as part of a public offering of securities. It includes essential details about the securities issue, such as the type, price, and size of the offering, along with a list of the underwriting group members who are participating in the offering. The underwriting group members are organized alphabetically based on the size of their participation. The term “tombstone ad” comes from the stark, black-and-white layout of these ads, which resembles a traditional tombstone.
Examples
- IPO Announcement: During an Initial Public Offering (IPO), a prominent tombstone ad might announce the release of new shares of a company, detailing the price and number of shares available for purchase.
- Bond Issue: An ad placed in financial newspapers detailing a new municipal bond issue, listing the underwriters involved in bringing the bond to market.
- Follow-on Financing: Corporations conducting follow-on offerings to raise additional capital might publish a tombstone ad to inform potential investors about new stock issues.
Frequently Asked Questions (FAQs)
Q: What information is typically included in a tombstone ad? A: A tombstone ad typically includes the type of security being offered, the price, the size of the offering, and a list of underwriters involved. It may also include other details like the company or entity offering the security and the expected date of the offering.
Q: Why is it called a tombstone ad? A: The name derives from the layout’s resemblance to a tombstone, usually featuring a plain, black-and-white design with straightforward, factual information.
Q: Are tombstone ads mandatory for public offerings? A: While not mandatory, tombstone ads are common practice in public offerings to ensure potential investors are informed about the details of the offer in a regulated and standardized format.
Q: Who prepares and publishes tombstone ads? A: Investment bankers working on behalf of the entity making the public offering prepare and publish the tombstone ads in financial newspapers and other media outlets.
Q: How do tombstone ads benefit investors? A: Tombstone ads provide investors with critical, concise details about new securities offering, helping them make informed investment decisions.
Related Terms
- Investment Banker: A financial services company or individual that advises and assists in capital raising, including underwriting public offerings.
- Public Offering: The sale of securities to the general public, typically through an initial public offering (IPO).
- Underwriting: The process by which investment bankers raise investment capital from investors on behalf of corporations and governments issuing securities.
Online References
Suggested Books for Further Study
- “Investment Banking: Valuation, Leveraged Buyouts, and Mergers and Acquisitions” by Joshua Rosenbaum and Joshua Pearl
- “Principles of Corporate Finance” by Richard A. Brealey, Stewart C. Myers, and Franklin Allen
- “Investment Banking Explained: An Insider’s Guide to the Industry” by Michel Fleuriet
Fundamentals of Tombstone Ad: Finance Basics Quiz
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