A red herring is a preliminary version of a company's prospectus, which is filed in connection with an upcoming initial public offering. This prospectus does not contain any information about the number of shares to be issued or the price at which they will be sold. This document is used to solicit expressions of interest from potential investors. Once the Securities and Exchange Commission declares a share registration to be effective, a replacement prospectus is issued that contains the previously missing share information. At that time, the expressions of interest from potential investors are converted into buy orders, if the investors wish to proceed.
The red herring name comes from the disclaimer that appears on the cover of the prospectus, in red ink. It states that the prospectus is incomplete, information may be changed, and the stock registration is not yet effective.