By Thomas Robinson, David Shulte, Howard Marmorstein, and
Reviewed by Gary W. Silverman, CFP®
I think this book may have more authors than any other one I've reviewed (we'll call the four "the authors"). Between these authors there are two Ph.D.'s, two MBAs, and a J.D. There are three CFAs, a CPA, and a CFP. And two of them are associate professors at the University of Miami. In other words, they know a lot. Considering the subject matter, that helps.
The title is another fairly descriptive one. Understanding and Evaluating Prospectuses, Offering Documents, and Proxy Statements is a 289-page book that tries to help you understand and evaluate prospectuses, offering documents, and proxy statements. (Didn't need my help for that, did ya?)
While useful for the more involved individual investor, this book is clearly aimed at the financial professional (or student) who needs to decide on the suitability of an investment and is generally unfamiliar with the process of doing so. Caveat emptor is emphasized throughout.
Each chapter of the book has examples, discussion questions, and exercises to reinforce the concepts. (Don't worry, the answers are in the back of the book.)
Chapter 1 describes the regulatory framework that surrounds security offering documents.
Chapter 2 provides a methodology to analyze financial statements and make valuation judgments. Included in this is ratio analysis. If the reader has a business degree, it provides a good refresher; if not, it provides a good foundation for understanding later chapters.
The stock of Google is used as a common example throughout the earlier chapters. Known to most readers, it provides a clear picture of how many of the documents fit together. We are able to examine the financials, then follow the IPO and secondary offerings across chapters 2–4.
Chapters 3–6 look at many types of prospectuses including those of IPOs, secondary offerings, mutual funds, and different forms of principle-protected securities. For stocks, questions about why companies go public, the difference between public and private offerings, and how offerings are prices are some of the topics covered.
The mutual fund chapter broadly looks at open-end companies, closed-end companies, unit investment trusts, and exchange traded funds.
Chapter 7 then covers the proxy statement, including key points to examine in determining how to vote a proxy. Quite useful as many of us have to justify our voting process.
Chapters 8–11 go back to the prospectus for alternative asset classes such as hedge funds, private equity funds, real estate investments, and real asset (think commodities) funds.
In my reading, I found that the book gave a good review and synopsis of those areas I use on a daily basis. It proved a good basic refresher for those subjects that I've studied but don't regularly use. And for those documents I never crack open, it was a nice, easy-to-understand introduction. Because of this I think that most readers of this column will find a place for this book on their shelves.
Gary W. Silverman, CFP®, owns a fee-only financial planning firm, Personal Money Planning, in Wichita Falls, Texas. He is the host of the television show Falls Informer, editor of the financial newsletter Personal Money Planning, and a frequent contributor to the print and broadcast media.
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