Business and Personal Finance Dictionary

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• RED HERRING
  
  When a security is offered to the public for the first time, the underwriter prepares a preliminary prospectus, called a red herring. While the name may refer to the parts of the document printed in red ink, the implication is that the document is an attempt to present the company in the best possible light. The reference is to the rather distinctive odor of the fish in question, which fleeing fugitives sometimes used to throw bloodhounds off their scent. Although the preliminary prospectus contains important information about the company, its offerings, financial projections, and investment risk, it is frequently revised before the final version is issued.
  
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