What is the definition of Private Placement?
Private Placement refers to securities sold straight to the investors and do not go through or are registered with the Securities and Exchange Commission. This is the act of trying to raise capital by going directly to investors. These investors are usually holders of pension funds, insurance companies, banks and mutual funds who are pre-selected so there is no need to have an initial public offering.
There is no need for securities sold this way to be registered with the Securities and Exchange Commission, since the sale is made only to a few people. Commonly, there is also no prospectus or detailed financial information that accompanies the private placement.
Products that are sold in private placements include stocks, warrants or promissory notes, as well as shares of preferred or common stocks.
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