A more thorough explanation:

A red-herring prospectus is a type of preliminary prospectus that a company files with the Securities and Exchange Commission (SEC) before offering its securities for sale. It is called a "red herring" because it contains a disclaimer in red ink stating that the information in the document is not complete or final.

The red-herring prospectus is used to gauge investor interest in the securities offering and to provide potential investors with information about the company and the securities being offered. It is also used to comply with SEC regulations that require companies to provide a prospectus before offering to sell stock in the corporation.

For example, if a company wants to go public and offer its shares for sale to the public, it must file a registration statement with the SEC. As part of the registration process, the company must also file a red-herring prospectus that contains information about the company, its business, and the securities being offered.

The red-herring prospectus is not a final prospectus and does not contain the final offering price or the number of shares being offered. Once the SEC approves the registration statement, the company can then file a final prospectus that contains all the necessary information about the securities offering.