Private placement

Private placement (or non-public offering) is a funding round of securities which are sold not through a public offering, but rather through a private offering, mostly to a small number of chosen investors. Generally, these investors include friends and family, accredited investors, and institutional investors.[1]

PIPE (Private Investment in Public Equity) deals are one type of private placement. SEDA (Standby Equity Distribution Agreement) is also a form of private placement. They are considered to present lower transaction costs for the issuer than public offerings.[2]

Since private placements are not offered to the general public, they are prospectus exempt. Instead, they are issued through Offering Memorandum. Private placements come with a great deal of administration and have normally been sold through financial institutions such as investment banks. New FinTech companies now offer an automated, online process making it easier to reach potential investors and reduce the administration.

  1. ^ Comptroller of the Currency Administrator of National Banks (March 1990). Private placements: Comptroller's Handbook (PDF). US Department of the Treasury. Retrieved 2009-06-13.
  2. ^ Securities and Exchange Commission (2006). Frequently Asked Questions About PIPES (PDF) (Report). p. 1. Retrieved 30 October 2020.

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