What Is a Tombstone Ad? Basics of Public Offering Notices

What is Tombstone?

A tombstone is a formal, minimalist print advertisement used in the financial industry to announce securities offerings such as initial public offerings (IPOs) or bond issuances. These ads comply with SEC regulations by providing essential details without constituting an offer to sell or a solicitation to buy, often linking investors to the full prospectus.

Named for their stark, gravestone-like design, tombstones list key facts like the issuer, security type, offering amount, and underwriting syndicate. They play a crucial role in the public offering process for companies structured as a C corporation.

Key Characteristics

Tombstone ads are distinguished by their simplicity and legal compliance. Key features include:

• Design: Black text on white background with heavy borders and centered layout, resembling a tombstone.
• Content: Issuer name, security type, number of shares or bonds, price range, and a summary of paid-in capital use.
• Underwriting hierarchy: Lead managers and bookrunners are prominently listed, followed by co-managers and other underwriters alphabetically by risk tier.
• Legal disclaimer: Explicitly states it is not an offer to sell or solicitation to buy, ensuring compliance with SEC rules.
• Publication: Commonly printed in financial newspapers or magazines after key offering milestones.

How It Works

Tombstone ads announce securities offerings at critical stages, such as after filing an S-1 registration statement or upon closing the deal. They serve as public notices that condition the market by providing essential information while directing investors to the full prospectus for detailed disclosures.

For example, a company issuing bonds may feature the bond’s face value, coupon rate, and maturity date in the tombstone, clearly listing the underwriting syndicate. This process ensures transparency while adhering to regulations governing obligation disclosures.

Examples and Use Cases

Tombstone ads are widely used across various industries and securities types. Common applications include:

• Equity offerings: Delta and other airlines use tombstones to announce new stock issuances or secondary offerings.
• Bond issuances: Corporations and municipalities publish tombstone ads to disclose bond sales, often featuring the bond's face value and terms.
• Index funds and ETFs: Managers of products like those in the best ETFs space may issue tombstones during capital raises or restructurings.
• Large-cap stocks: Companies listed among the best large-cap stocks also utilize tombstone ads when conducting public offerings.

Important Considerations

While tombstone ads are an essential disclosure tool, they provide only basic information and must be supplemented by the full prospectus before making investment decisions. Always review the detailed offering documents to understand risks, financials, and legal opinions.

Moreover, the structure of underwriting syndicates reflected in a tombstone can signal market confidence and prestige, impacting your perception of the offering’s quality. Understanding the hierarchy can help you evaluate the roles of lead managers versus co-managers in the deal.