What is a greensheet?
A greensheet is a short, internal marketing document prepared by an underwriter that summarizes the main facts, selling points, risks and initial pricing of a new issue (for example, an IPO or other “new issue” of stock or bonds). Greensheets are circulated only within the underwriting firm — to institutional sales desks and registered representatives — to help underwriters and salespeople evaluate demand, identify likely large buyers, and prepare to market the issue. They are not public-disclosure documents and must not contain material that is not already disclosed in the official prospectus. (Source: Investopedia)
Key takeaways
– Purpose: internal summary and selling tool for underwriter sales forces and brokers.
– Audience: registered representatives, institutional sales desks within the underwriting syndicate.
– Scope: condensed presentation of information that appears in the prospectus; should not add new material.
– Legal limits: for internal use only; must include a disclosure describing distribution limits and that it is not a solicitation; information must match the issuer’s prospectus.
– Complementary document: the prospectus is the full, public, SEC‑filed disclosure for investors.
Why underwriters prepare greensheets
– Quickly orient selling personnel to the deal’s economics and strategy.
– Highlight the “why” for sales pitches: growth catalysts, valuation rationale, comparables.
– List potential buyer categories and suggested outreach priorities.
– Identify timing, allocation policy, and any pitfalls or red flags for suitability screening.
– Standardize messaging across the syndicate’s distribution channels.
What a greensheet typically contains
(Use as a checklist when preparing or reviewing a greensheet.)
– Deal identification: issuer name, ticker (if assigned), type of security, offering size, expected use of proceeds.
– Offering basics: anticipated price range, offering date/timeline, underwriter(s) and syndicate structure.
– Investment thesis / primary strengths: growth drivers, market opportunity, competitive advantages.
– Key financials (summary): revenue, EBITDA/profitability metrics, recent trends—only as disclosed in the prospectus.
– Valuation context: comparables, implied pricing metrics at proposed range.
– Risks and negatives: principal risk factors summarized (must be balanced and mirror prospectus).
– Suitability considerations: investor profiles for whom the offering is (or isn’t) appropriate.
– Allocation guidance: expected demand, how allocations may be prioritized (e.g., long‑term institutional accounts, retail strategies).
– Sales strategy and suggested pitches: talk track bullet points and likely buyer segments.
– Roadshow/marketing schedule and analyst/investor presentation logistics.
– Legal/administrative notes: distribution restrictions, required internal approvals, blackout or quiet‑period reminders.
– Disclosure block: statement that the greensheet is internal, contains only information in the prospectus, is not a solicitation, and should not be circulated outside authorized personnel.
Practical steps to prepare a compliant, useful greensheet
1. Start with the prospectus (and any amendments).
– Extract the facts, risks and material disclosures directly from the prospectus and registration statement. Do not add new substantive information that is not in the public filings.
2. Coordinate with deal teams.
– Work with syndicate desk, corporate client contacts, legal/compliance and investor relations to confirm factual accuracy and the firm’s allocation policy.
3. Draft a balanced summary.
– Emphasize both positives and negatives. The greensheet should not be a pure sales brochure; it must reflect the prospectus’ risk/benefit balance.
4. Include required disclosure language.
– Add a clear statement on the purpose of the document, its distribution restrictions, its limitation to information in the prospectus, and that it is not a public solicitation.
5. Review with legal/compliance.
– Obtain sign‑off from internal legal and compliance before circulation. Confirm the content doesn’t suggest additional or nonpublic material facts.
6. Approve and distribute on a need‑to‑know basis.
– Limit distribution to brokers and institutional sales desks involved in the deal; use secure channels and track recipients.
7. Maintain version control and retention.
– Time‑stamp the greensheet, preserve copies in compliance files, and retain any distributor logs per firm recordkeeping policies and regulatory requirements.
8. Update as the deal evolves.
– If the prospectus is amended or pricing/terms change, issue revised greensheets promptly and withdraw superseded versions.
How registered representatives and salespeople should use a greensheet
– Use it as a quick reference to identify whether the offering fits client objectives and suitability profiles.
– Adopt the prepared talk points and buyer-segmentation guidance, but verify any client‑specific suitability with further due diligence.
– Always refer retail clients to the prospectus for full disclosure and provide the prospectus where required.
– Do not forward the greensheet to clients or outside parties; treat it as internal material.
Do’s and don’ts (practical compliance guidance)
– Do: Keep the message consistent with the prospectus; highlight both risks and benefits.
– Do: Include a disclosure explaining internal‑use restriction and non‑solicitation.
– Do: Seek compliance/legal review before distribution.
– Don’t: Add material, forward‑looking claims, or analysis that is not in the prospectus (no new material facts).
– Don’t: Circulate outside authorized underwriters or syndicate sales desks.
– Don’t: Use greensheet content as a client brochure or substitute for the prospectus.
Special considerations and red flags
– Conflicting information: any factual mismatch between the greensheet and the prospectus must be resolved before distribution.
– Material events: if a material event occurs (e.g., new financial disclosure, regulatory action), do not rely on an old greensheet—issue an updated version only after confirming public disclosure.
– Quiet periods: sales personnel must observe quiet/blackout periods and other deal‑specific restrictions; consult compliance prior to contacting certain clients.
– Conflicts of interest: disclose any firm conflicts that are in the prospectus and ensure allocation guidance doesn’t favor conflicted accounts improperly.
– Retail suitability: if the offering is complex or risky, the greensheet should flag it as generally unsuitable for most retail clients absent specific circumstances.
Suggested greensheet template (fields to include)
– Header: Issuer, security type, expected ticker, deal date, version/date.
– One‑line investment thesis.
– Offering summary: size, price range, shares/bonds offered, use of proceeds.
– Quick financial bullets: last 12 months revenue, profitability snapshot (from prospectus).
– Strengths (3–5 bullets).
– Key risks (3–5 bullets).
– Valuation / comps: key multiples at mid‑range pricing.
– Target buyer list / suggested allocation approach.
– Talk tracks: 4–6 succinct selling points.
– Compliance/distribution notice and contact info for syndicate desk.
– Signature block for syndicate head or compliance approver.
Recordkeeping and audits
– Treat greensheets as part of the firm’s deal documentation. Keep copies and distribution logs consistent with the firm’s record retention policies and any applicable regulatory requirements. Be able to demonstrate who received which version and when, especially in the event of internal review or regulatory inquiry.
Example scenario
A technology IPO is priced with a wide range. The greensheet might:
– Summarize the company’s recurring‑revenue model and customer concentration (from the prospectus).
– Note that management has little operating history as a public company (risk from prospectus).
– Suggest reaching out to long‑only growth institutional accounts and hedge funds active in the sector.
– Provide suggested allocation priorities (institutional long‑term buyers first), and remind sales staff that the greensheet is internal and the prospectus must be provided to retail clients.
Conclusion
Greensheets are a pragmatic internal tool that condense prospectus information into sales‑focused summaries for underwriters’ distribution networks. They speed syndicate coordination and help match offerings to prospective buyers, but they operate under strict limits: they must be internally restricted, balanced, and strictly consistent with public prospectus disclosures. Firms should apply rigorous compliance review, version control, and retention practices to ensure the greensheet supports distribution while maintaining regulatory and fiduciary standards.
Source
– Investopedia: “Greensheet” — https://www.investopedia.com/terms/g/greensheet.asp
If you’d like, I can:
– Draft a one‑page greensheet template you can adapt to a specific offering, or
– Provide a short checklist for compliance review before distributing a greensheet. Which would be more helpful?