A teaser document is a brief summary of a proposed stock offering or other investment that is distributed to potential buyers in advance of its launch in public. It is designed to test interest in the target market for the offering being considered.
The teaser document is by definition preliminary in nature and may not even reveal the name of the company considering the offering.
The teaser may not name the company considering the offering.
If the teaser produces interest, the company may follow up with a formal prospectus and a launch.
A teaser document is the first tentative step towards a major financial move by a company, such as an initial public offering or even the sale of the company.
The document is usually created by the staff of the investment bank hired to prepare the launch of the venture. Usually only one or two pages in length, it contains summary information about the issuing company and the investment opportunity it is offering.
The teaser document’s purpose is to determine the demand for the security in question among institutional investors, hedge funds, and deep-pocketed individual investors. At best, the document may drive demand for the offering.
The teaser usually contains few hard facts and may highlight only a few positive details about the company and its proposed offering. For example, information on revenues may be available but cost information may be omitted.
The teaser can be used to solicit indications of interest when a company is considering an initial public offering. The investment bank that authored it can shop around the teaser as part of its attempts to assess the market demand for the company’s stock issue.
If the feedback is positive, it could be an indication that the company has a strong market for its offering. If there is little interest, the company may opt to delay or cancel the offering.
Orders for securities cannot be accepted based on the information in the teaser. A final prospectus must be issued before orders can be taken for the newly issued stock.
Although the name of the company behind the offer may be omitted, a number of other key details should be included, according to the Corporate Finance Institute. These include concise descriptions of the company’s line of business, major products, industry, key customers, past revenues, and projected future revenues.
The investment offered is defined but no prices are mentioned.
The teaser document has been used to introduce ventures from initial stock offerings to partial buyouts or total buyouts of companies.
The teaser document has in recent years become the opening pitch opportunity for entrepreneurs startup founders. Its primary audience is made up of private equity firm executives, who may see hundreds of them in a year.
For that reason, the rules for its creation have become as formal as those for a resume. In short, they are:
Keep it short
Keep it professional
Keep it factual.