Private Placement Offerings Creating Offshore Interest For Funds
Alan Guinn
March 28, 2008
With the equities market in turmoil--up one day and down the next--and with FOREX too volatile for some investors, what is the investor to do?
A sophisticated investor interested in long term gain has the opportunity to invest in non-public filings called Private Placement Offerings, intended to raise capital for business and industry.
The term Private Placement defines either a debt or equity transaction which limits the number of investors involved to a relatively small number, and targets investment by private equity funds, insurance companies, and trusts, among other participants.
US Accredited Investors are prime targets for investment in a Private Placement. Offshore investment funds also successfully invest in Private Placements to benefit their clients.
The amount of money raised within a Private Placement varies, but generally is considered to be in the $10 Million range or less.
The Private Placement Offering is governed by a document called a Memorandum. The Private Placement Memorandum, or PPM, develops traction in several different directions; first and foremost, a business which is seeking funding---but does not want a large number of shareholders of common stock---may elect to complete a Private Placement Offering.
Over the years, the PPM format has proven very popular to raise capital in lesser amounts than that which would be raised through an Initial Public Offering.
Investors or investment groups will participate in a Private Placement because the principal objective of those groups is an investment vehicle which they might hold longer than an equities placement—and as a functional aspect of the Private Placement, the potential investor is actually warned in writing that there may be no additional or secondary market for what he/she is purchasing.
Another way that a Private Placement can develop traction is within the PPM format itself; the funds distribution may cover a purchase of stock of the seller, and the deal may be structured so that equities will not only return capital to the investor, but may also return profits through the percentage of equity held.
In other words, a Private Placement can become an excellent win-win for the investor.
Offshore investment funds are quick to buy into Private Placements because the limited numbers of partners in the Placement are often insurance companies or equity funds, so the investment fund is in excellent company. The investor sees a long term payout back against the money invested as well as the upside potential created by the profit and/or dividends payout. Private Placements can offer either equity or debt positions. Moreover, they can be structured in terms and conditions which are beneficial to both parties.
Are Private Placements Really "Private?"
In reality, they have a degree of anonymity, but they are anything but private. Think of the disclosures required for an Initial Public Offering of common stock. Now, remove the requirement of a rating by a credit rating agency—although some rating agencies do actually rate Private Placements—and one has a very similar set of rules regarding the transaction.
Key to this is what is known in the USA as SEC Regulation D or "Reg D" in trader/investor parlance.
The Private Placement Memorandum/Regulation D Offering is comprised of several parts, creating a virtual template for the PPM:
1) The Structure of the Offering
2) The Private Placement Memorandum Offering
3) The Subscription Agreement
4) The Promissory Note
5) The Form "D" which is sent to the Securities and Exchange Commission in Washington, DC.
This is a strictly structured document, which takes significant time to craft; most companies hire a legal group well acquainted with the Rules and Regulations to craft the various parts of the template for them.
What helps to generate Private Placement popularity?
A structured Agreement between Investor and recipient using a prescribed format and answering investment questions within this framework is viewed by many investors as less risky than simply loaning a company money for any one of a number of purposes. The key to successful Private Placements? Good planning, good documentation, and good working partners. The investor knows what he/she wants to achieve, and is willing to take the return offered by the group offering the Placement.
In the world of offshore funds, Private Placements offer a stellar opportunity to build equity quickly and realize double digit returns, which can then be passed on to investors within the pool. Private Placement Offerings can be found in many different businesses and are applicable to a broad range of both borrowers and lenders. Look for Private Placements funds offering double digit returns.
A sophisticated investor interested in long term gain has the opportunity to invest in non-public filings called Private Placement Offerings, intended to raise capital for business and industry.
The term Private Placement defines either a debt or equity transaction which limits the number of investors involved to a relatively small number, and targets investment by private equity funds, insurance companies, and trusts, among other participants.
US Accredited Investors are prime targets for investment in a Private Placement. Offshore investment funds also successfully invest in Private Placements to benefit their clients.
The amount of money raised within a Private Placement varies, but generally is considered to be in the $10 Million range or less.
The Private Placement Offering is governed by a document called a Memorandum. The Private Placement Memorandum, or PPM, develops traction in several different directions; first and foremost, a business which is seeking funding---but does not want a large number of shareholders of common stock---may elect to complete a Private Placement Offering.
Over the years, the PPM format has proven very popular to raise capital in lesser amounts than that which would be raised through an Initial Public Offering.
Investors or investment groups will participate in a Private Placement because the principal objective of those groups is an investment vehicle which they might hold longer than an equities placement—and as a functional aspect of the Private Placement, the potential investor is actually warned in writing that there may be no additional or secondary market for what he/she is purchasing.
Another way that a Private Placement can develop traction is within the PPM format itself; the funds distribution may cover a purchase of stock of the seller, and the deal may be structured so that equities will not only return capital to the investor, but may also return profits through the percentage of equity held.
In other words, a Private Placement can become an excellent win-win for the investor.
Offshore investment funds are quick to buy into Private Placements because the limited numbers of partners in the Placement are often insurance companies or equity funds, so the investment fund is in excellent company. The investor sees a long term payout back against the money invested as well as the upside potential created by the profit and/or dividends payout. Private Placements can offer either equity or debt positions. Moreover, they can be structured in terms and conditions which are beneficial to both parties.
Are Private Placements Really "Private?"
In reality, they have a degree of anonymity, but they are anything but private. Think of the disclosures required for an Initial Public Offering of common stock. Now, remove the requirement of a rating by a credit rating agency—although some rating agencies do actually rate Private Placements—and one has a very similar set of rules regarding the transaction.
Key to this is what is known in the USA as SEC Regulation D or "Reg D" in trader/investor parlance.
The Private Placement Memorandum/Regulation D Offering is comprised of several parts, creating a virtual template for the PPM:
1) The Structure of the Offering
2) The Private Placement Memorandum Offering
3) The Subscription Agreement
4) The Promissory Note
5) The Form "D" which is sent to the Securities and Exchange Commission in Washington, DC.
This is a strictly structured document, which takes significant time to craft; most companies hire a legal group well acquainted with the Rules and Regulations to craft the various parts of the template for them.
What helps to generate Private Placement popularity?
A structured Agreement between Investor and recipient using a prescribed format and answering investment questions within this framework is viewed by many investors as less risky than simply loaning a company money for any one of a number of purposes. The key to successful Private Placements? Good planning, good documentation, and good working partners. The investor knows what he/she wants to achieve, and is willing to take the return offered by the group offering the Placement.
In the world of offshore funds, Private Placements offer a stellar opportunity to build equity quickly and realize double digit returns, which can then be passed on to investors within the pool. Private Placement Offerings can be found in many different businesses and are applicable to a broad range of both borrowers and lenders. Look for Private Placements funds offering double digit returns.