Future Uncertainty: Forecasts In IPO Prospectuses

Although not required by law, the inclusion of financial forecasts in Canadian IPO prospectuses has become commonplace–a necessary tool to market and price an offering successfully.

Once public, issuers will typically continue to include the forecast in their continuous disclosure filings (effectively reaffirming the forecast). While forward looking financial information like forecasts can be very helpful to the market, it is also disclosure that carries inherent risks: when that disclosure has to be revisited, the effects on an issuer can be significant and negative. But, when does an issuer have to reconsider a forecast, and either update it or withdraw it altogether?

Canadian securities law requirements