When an IPO is marketed to institutions and brokers before the prospectus has been lodged with ASIC, this is done via a ‘pathfinder’ prospectus. The pathfinder is distributed to a select few, usually consisting of underwriters and institutional investors, allowing them to consider the company and IPO prior to lodgement of the prospectus with ASIC. This enables the issuing company to create demand and assess market interest before setting the price for the IPO.
In an IPO pathfinder, investors are asked to commit to participating in an IPO before the prospectus has been lodged with ASIC. Generally, the goal of a pathfinder prospectus is to create demand and eventually set the price for the offering.
To minimise the risk of inappropriate access by retail investors, pathfinders are specifically restricted to sophisticated or professional investors, and possibly experienced investors, under section 708 of the Corporations Act 2001 (Cth).