For companies, the way to attract funds during financing is very important. For this, they use Initial Public Offering (IPO) or Private Placement. While the IPO means offering the company’s shared stocks to hundreds or thousands of investors, the private placement is focused on a limited number of investors. The two main differences between these two offerings are 1st – a number of investors and 2nd – less regulation in case of the private placement.
The private placement is the procedure of money investment in stocks; it usually comes from investors. As this is a private placement, the company can set up some criteria for investors. Mainly, only accredited investors may participate in the private placement. It might include the wealthy individual investors, banks and other financial institutions, funds, insurance companies, venture capital firms or pension funds.
The private placement is a very attractive way for growing company and expanding new markets. For businessmen, such investment is easier than IPO – this is less expensive and time-consuming as it does not require the help of brokers or underwriters. It is managed as an unregistered offering. Another benefit is that the company is not going public and have closed his confidential information, such as finances.