Legal Definitions - stickering

Stickering

In the context of securities, stickering refers to the practice of updating a legal disclosure document, most commonly a prospectus, by physically attaching adhesive labels or "stickers" that contain new and material information. This method allows companies to quickly inform potential investors about significant changes or developments that occur after the prospectus has been printed but before the offering is completed, without the need to immediately reprint the entire document.

Here are some examples:

• Example 1: Executive Departure

  A technology startup has printed its initial public offering (IPO) prospectus and is in the final stages of marketing its shares to investors. Just days before the offering is set to close, the company's Chief Financial Officer unexpectedly resigns. This is considered material information that could influence an investor's decision.

  How it illustrates: Instead of delaying the IPO to reprint thousands of prospectuses, the company would use stickering to affix labels to all existing prospectuses, clearly disclosing the CFO's departure and any potential implications. This ensures investors receive the most current information before making an investment.

• Example 2: Regulatory Change Impact

  A pharmaceutical company has issued a prospectus for a new bond offering to fund research and development. Shortly after the prospectus is distributed, a new government regulation is announced that significantly impacts the approval process for one of the company's key drugs in development, potentially delaying its market entry and affecting future revenue projections.

  How it illustrates: To comply with disclosure requirements and inform potential bondholders, the company would employ stickering. They would attach stickers to the prospectuses, detailing the new regulatory impact and its potential financial consequences, thereby providing an immediate update without a full reprinting.

• Example 3: Acquisition of a New Asset

  A real estate investment trust (REIT) has filed a prospectus for a secondary offering of shares to raise capital for future acquisitions. After the prospectus is printed but before the offering closes, the REIT successfully completes the acquisition of a significant new property that was not previously disclosed in the initial prospectus.

  How it illustrates: The REIT would use stickering to update the existing prospectuses. The stickers would contain details about the newly acquired property, including its location, tenants, and expected financial contribution, ensuring that investors have a complete and current picture of the REIT's assets before investing in the offering.