Deciphering a Company's Prospectus

A prospectus concludes five parts: cover; catalogue; main contents; appendix; references.

When an investor reads a company’s prospectus, attention should be paid to the following aspects:

1) Risks and counter measures: it explains the existing risks of the company and whether the company's countermeasures are effective;

2) Use of proceeds: it summarizes how the raised fund will be used by the company;

3) Dividend policy: it dictates how much cash is returned to shareholders;

4) Financial results: this part will help investors evaluate the stability and flexibility of the company’s operating performance;

5) Main information of the offering: relevant information about the issuer, principal shareholders;

6) Earnings forecasts: it is directly related to the issuance of the company's stock shares. Generally speaking, listed companies are more willing to predict profits optimistically and make the profit figures larger;

7) Development plan: it explains the management’s plan for company’s future development;

8) Other matters that the issuer considers to have a significant impact on investors' judgment.