Private Placement


DEFINITION of 'Private Placement'

The sale of securities to a relatively small number of select investors as a way of raising capital. Investors involved in private placements are usually large banks, mutual funds, insurance companies and pension funds. Private placement is the opposite of a public issue, in which securities are made available for sale on the open market.


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BREAKING DOWN 'Private Placement'

Since a private placement is offered to a few, select individuals, the placement does not have to be registered with the Securities and Exchange Commission. In many cases, detailed financial information is not disclosed and a the need for a prospectus is waived. Finally, since the placements are private rather than public, the average investor is only made aware of the placement after it has occurred.

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  1. How does private placement affect share price?

    Private placement is a common method of raising business capital through offering equity shares. Private placements can be ... Read Full Answer >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. What does 'going public' mean?

    Going public refers to a private company's initial public offering (IPO), thus becoming a publicly traded and owned entity. ... Read Full Answer >>
  6. Can mutual funds invest in hedge funds?

    Mutual funds are legally allowed to invest in hedge funds. However, hedge funds and mutual funds have striking differences ... Read Full Answer >>

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