What role do tombstone ads play during the waiting period of a registration statement?

Tombstone ads serve a significant purpose during the waiting period of a registration statement by advertising potential offers. They are commonly used in the context of securities offerings to inform the public that a security will soon be available for purchase. These ads typically contain basic information about the security, such as the name of the issuing company, the type of security being offered, and details on how interested parties can obtain more information.

The use of tombstone ads is particularly important because, during the waiting period after a registration statement is filed with the SEC and before it becomes effective, direct sales solicitations are prohibited. However, companies aim to raise awareness and gauge interest without making any actual offers for sale. Tombstone ads effectively fulfill this need, providing potential investors with essential information while adhering to regulatory requirements that limit promotional activities during this phase. Thus, they play a vital role in ensuring transparency and facilitating market interest prior to the official sale of the securities.