Prosper Prospectus Guide
The following guide highlights some of the major portions of the prospectus. It is for informational purposes and is not all-inclusive.
- What is a prospectus?
- Why should I read the prospectus?
- What are the key sections of a prospectus that I should focus on reading?
- What areas should I review in more detail?
- What are the risks involved in investing in the Notes?
What is a prospectus?
A prospectus is the offering document included in the registration statement filed with the SEC. The contents are laid out as required by the SEC, and provide a description of both Prosper and how Prosper’s platform operates. We refer to this prospectus, which is approximately 85 pages in length, as the “Base Prospectus”
The Base Prospectus does not contain a description of the specific terms of each series of Notes. The specific terms for each series of Notes are set forth in the borrower listings on our platform. Each borrower listing supplements and is made a part of the Base Prospectus and is referred to as a prospectus supplement. The Base Prospectus and the prospectus supplement for each series of Notes (i.e., the borrower listing upon which you may place a bid) collectively form the prospectus and disclose the information you should consider in making an investment decision.
Note: Information, other than the prospectus and information appearing in the prospectus, that can be accessed via hyperlink from the web page for each borrower listing (as it does not describe the terms of the Notes) is not a part of the prospectus.
As Notes are sold, a “listing and sales report” will be posted on our website, describing all borrower loan information set forth on the bidding page for that series of Notes in tabular form, and the entire bidding history, the maturity date and final interest rate on the borrower loan and the yield percentage on the Notes. The listing and sales report is also a prospectus supplement, and together with the Base Prospectus forms the final prospectus.
Why should I read the prospectus?
An investment in the Notes carries with it an inherent degree of risk. Reading the prospectus is the most effective way to make sure you understand how the platform operates and the risks involved in investing in the Notes.
What are the key sections of a prospectus that I should focus on reading?
The prospectus cover provides a summary of the general terms of the offering, including the aggregate number of Notes being offered for sale.
“Prospectus Summary” and “The Offering”
These sections provide a quick snapshot of our Note offering, and can be a good place to determine whether or not an investment in a series of Notes is of interest to you and warrants further research. The “Prospectus Summary” provides a brief summary of how our platform operates, while “The Offering” section summarizes the material terms of the Notes we are offering for sale. As discussed above the specific terms for each series of Notes are set forth in the borrower listings.
Questions and Answers
This section operates as an FAQ (“Frequently Asked Questions”) section and provides answers to questions you may have regarding the Notes and the operation of our platform in a short concise format.
This section is meant to highlight the specific risks that an investor faces in investing in the Notes. This can be a good place to glean a list of concerns to consider as you read deeper into the prospectus. The risk factors section has four subsections, which discuss:
- the risks related to a borrower’s default under the underlying borrower loan upon which a series of Notes is dependent for payment,
- the risks inherent in investing in the Notes,
- the risks related to Prosper, our platform and our ability to service the Notes, and
- the risks related to compliance and regulatory matters.
About the Platform
This section provides a detailed description of our platform, including a description of how our platform operates, how loans are listed, how bids are made, how the online auction process works, how Notes are purchased and how an investor receives payments under the Notes, including a description of the fees and other charges we will impose.
Summary of Material Agreements
This section summarizes the terms of the material agreements applicable to our members, including the material terms of the borrower registration agreement, the lender registration agreement and the indenture under which the Notes will be issued.
Material U.S. Federal Income Tax Considerations This section discusses the material U.S. federal income tax considerations generally applicable to investors who purchase the Notes. This section is not intended to be legal or tax advice to any particular person and investors are urged to consult with their own tax counsel.
This is the segment of the prospectus where management attempts to explain its business strategy, the industry of which it is a part, and its competitive positioning.
In this section is a list of the company’s senior managers and directors. The most informative portions here are generally the management bios and the breakout of management’s compensation.
Here you will find a list of the equity ownership of senior management, directors, and other persons who own 5% or more of Prosper.
Management’s Discussion and Analysis
This item is the keystone for dissecting Prosper’s financial position. Included here is historical income statement and balance sheet data and an analysis of our financial performance.
The final section of the prospectus contains a complete set of standard financial statements, including the balance sheet, income statement, and statement of cash flows.
What are the risks involved in investment in the Notes?
As we previously mentioned, investment in the Notes carries with it an inherent degree of risk. While diligent research may help reduce the degree of risk, there are many unforeseen factors that could influence the outcome of your investment. Before purchasing Notes, you should evaluate how the loss of your entire investment would impact your portfolio.