Private placement


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Private placement

The sale of a bond or other security directly to a limited number of investors. For example, sale of stocks, bonds, or other investments directly to an institutional investor like an insurance company, avoiding the need for SEC registration if the securities are purchased for investment as opposed to resale. Antithesis of public offering.

Private Placement

The sale of a new issue to a few large institutional investors without registering with the SEC. A private placement is exempt from SEC registration, subject to certain restrictions, because it is not offered to the general public. In order to make a private placement, the issuer must file a private placement memorandum (PPM), which explains exactly why the issue complies with SEC Regulation D exempting certain companies from registration; this is done to protect both the issuer and the investors. According to Regulation D, a PPM must contain a complete description of the security and the terms of the sale. It must also include applicable information about the issuer's financial situation and applicable risk factors. Private placement is also called direct placement.

private placement

The sale of an issue of debt or equity securities to a single buyer or to a limited number of buyers without a public offering. The placement is generally conducted by an investment banker who acts as an agent in bringing together the seller and the buyer(s).
Case Study For companies needing investment capital, private placements often save time and fees compared to public offerings. In early 2000 Healtheon/WebMD Corporation issued $930 million of new stock directly to the Janus funds. From Healtheon's standpoint, the issue was taken care of quickly without the need to pay a hefty fee to the firm's investment banker, Morgan Stanley Dean Witter (now Morgan Stanley). From Janus's standpoint, the firm was able to obtain a small discount on a sizeable block of stock it wanted to buy. In addition, Janus wasn't required to take a chance on bidding up the price of Healtheon stock by buying shares in the open market. Shares included in the private placement increased Janus's stake in Healtheon from 3% to 12%, a relatively large position for a mutual fund.

Private placement.

If securities are sold directly to an institutional investor, such as a corporation or bank, the transaction is called a private placement.

Unlike a public offering, a private placement does not have to be registered with the Securities and Exchange Commission (SEC), provided the securities are bought for investment and not for resale.

References in periodicals archive ?
Michael Zuppone, a partner and chair of the Securities Practice Group at law firm Paul Hastings, Janofsky & Walker LLP in New York, recalls doing a private placement a few years ago for a fulfillment company in the e-commerce sector.
In this and other respects, the process of conducting and completing a Rule 144A offering can be more efficient than that associated with a traditional private placement, in which multiple investors might not act together as a group and the process generally lacks the centralization and uniformity imposed by having a single underwriting investment bank or syndicate.
Private placement wrappers should be set up as nonmodified endowment contracts in which premiums are paid over several years.
As long as you maintain control of the business (a minimum 51% equity stake), a private placement can be a viable avenue to take.
The private placement market is an important source of long-term funds for U.
By contrast, the private placement market, long a standby of middle-market companies, may have had more money to lend in 1990 than there were takers, with its funding volume falling to only $70 billion, from 1989's $190 billion and 1988's $175 billion.

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