What is a Private Placement?
A Private Placement is private investment capital invested in a company, usually from individual investors in the form of stock and bonds. In the United States, Private Placements do not need to be registered with the Securities Exchange Commission. Regulation D and Rule 4(2) of the Securities Act of 1933 are the most popular forms of non-public private placements. The process can also be referred to as a Private Stock Offering as well.
Private Placement Benefits
Private Placements have a high degree of flexibility in regard to the amount of money that can be raised. Private Placements can range in size from less than $50,000 to upwards of $50 million. Private Placements come in a variety of forms and may consist of debt, equity or a combination of debt and equity financing. The investors that fund the Private Placement are usually more "business friendly" than lending institutions or venture capitalists due to the fact that they are "hand-picked" by the company raising money for itself.
Who are Private Placement Investors?
Private Placements invariably comes from accredited investors as defined by the SEC Rule 501 under Regulation D as:
- An individual earning 200k per year.
- A household with income of $300K per year or having a net worth over $1 m
