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 often a cheaper source of capital than a public offering.
In the United States
Although these Private Placements are subject to the Securities Act of 1933, the securities offered through private placements do not have to be registered with the Securities and Exchange Commission so long as the securities conform to an exemption from registrations as set forth in the Securities Act of 1933 and SEC rules. Most private placements are offered under the Rules known as Regulation D.
Different rules under Regulation D provide stipulations for offering a Private Placement. These stipulations outline required financial criteria for investors, rules of solicitation, and disclosure requirements among other conditions that need to be satisfied.
Private placements may typically consist of offers of common stock or preferred stock or other forms of investments. These other investment categories can include warrants, promissory notes (including convertible promissory notes), or bonds. Although high net worth individuals can readily invest in these offerings, Private Placements can also easily be marketed to institutional investors such as banks, insurance companies, pension funds, investment companies, and hedge funds.
Generally, accredited investors are those with a net worth in excess of $1 million or annual income exceeding $200,000 or $300,000 combined with a spouse. Under these exemptions, no more than 35 non-accredited investors may participate in a private placement. In most cases, all investors must have sufficient financial knowledge and experience to be capable of evaluating the risks and merits of investing in a company.
Our Vantage Advisors Capital Markets Division is dedicated to assisting business owners’ reach their various financing objectives. These objectives can include but are not limited to expansions, start-ups, buyouts, mergers, and acquisitions.
We at Vantage Advisors understand the majority of business owners are not familiar with the procedures and requirements to access capital funding using private placements, yet in order to complete the process they must get involved in critical decisions and negotiations in an arena that is very new and unfamiliar to them. We at Vantage Advisors realize that can easily create a very stressful situation for many entrepreneurs. For this reason we have simplified and streamed lined the private placement funding process in such a way to educate business owners while instilling a sense of comfort and control from start to finish.
A complete and detailed business plan is the only item needed to begin the private placement funding process. We encourage entrepreneurs to consider a private placement if they are in need of capital for their business.