Here are some of the terms investors should understand before making any investment decision.

1) Term Sheet: A term sheet is a bullet-point document outlining the material terms and conditions of a business agreement. It serves as a guide but is not necessarily binding.

2) Letter of Intent (LOI): A letter of intent is similar to the term sheet. Both are mostly non-binding documents meant to record two or more parties’ intentions to enter into a future agreement. The only difference between a term sheet and a Letter of Intent is the document style. Letter of Intent is written in letter form and a term sheet lists deals terms in bullet points.

3) Memorandum of Understanding (MOU): A memorandum of understanding is an agreement between two or more parties outlined in a formal document. It is not legally binding but signals the willingness of the parties to move forward with a contract.

4) Heads of Agreement (HOA): A Head of Agreement is a properly drafted, non-binding document that sets out the key terms of a proposed agreement between parties.


In short, only “Letter of Award” is confirmed and investors should avoid chasing a stock that has seen its price rise multiple times based on non-legally binding documents.