Offering Memorandum

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DEFINITION of 'Offering Memorandum'

A legal document stating the objectives, risks and terms of investment involved with a private placement. This includes items such as the financial statements, management biographies, detailed description of the business, etc. An offering memorandum serves to provide buyers with information on the offering and to protect the sellers from the liability associated with selling unregistered securities.

Also known as a "private placement memorandum" (PPM).

BREAKING DOWN 'Offering Memorandum'

You can essentially think of the offering memorandum as a fancy business plan. In practice these are a formality to meet the requirements of securities regulators since most sophisticated investors perform their own extensive due diligence.

Offering memorandums are for private placements, while prospectuses are for publicly-traded issues.

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RELATED FAQS
  1. What is required to become an accredited investor in a private placement?

    The term "accredited investors" is defined by the U.S. Securities and Exchange Commission (SEC) as individuals with a net ... Read Full Answer >>
  2. What is the difference between a summary prospectus and an offering memorandum?

    All securities offered to investors in the United States are required to comply with the anti-fraud provisions of federal ... Read Full Answer >>
  3. What factors might make a private placement a risky investment?

    Factors that make private placements risky investments include the potential loss of capital, a possibility of fraud associated ... Read Full Answer >>
  4. Where do penny stocks trade?

    Generally, penny stocks are traded through the use of the Over the Counter Bulletin Board (OTCBB) and through pink sheets. ... Read Full Answer >>
  5. Where can I buy penny stocks?

    Some penny stocks, those using the definition of trading for less than $5 per share, are traded on regular exchanges such ... Read Full Answer >>
  6. How are American Depository Receipts (ADRs) priced?

    The price of an American depositary receipt (ADR) is determined by the bank or other financial institution that issues it. ... Read Full Answer >>

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