INITIAL PUBLIC OFFER VERSUS PRIVATE PLACEMNT
Business is all about money. Whether starting a business or growing and expanding, business owners need money -better known as capital. This provides an opportunity for investors who trade their money for potential future profit. Both private placements and initial public offerings, or IPOs, are methods of raising capital for a business.
Initial Public Offer (IPO)
| Private Placement (P.P)
The first sale of stock by a company to the public. IPOs are often used as a way for a young company to gain necessary market capital. When a company goes public, its financial data and corporate structure become public as well.
| The sale of securities to a relatively small number of select investors as a way of raising capital while maintaining control over a company, or to allow support by a partner company without a merger or takeover.
| IPO's require registration with the SEC.
| It is subject to less regulation with the Securities and Exchange Commission. In many cases detailed financial information is not disclosed and a the need for a prospectus is waived
| under the Securities Act of 1933, there are strict registration requirements for IPO's so that public investors are adequately informed before they invest their money
| The most common way of making a private placement is under Regulation D. Regulation D has three categories of offerings that are exempt from registration.
| An IPO (Initial Public Offering) is a first-time offering of a company's equity shares to the public.
| A private placement is an offering of a company's equity to a select few investors only...normally one or two at a time.
| The offering is normally made through a public subscription of shares within a specified time-frame.
| This type of offering normally does not need a 'public' subscription it is referred to as private.
| IPOs are often issued by smaller, younger companies seeking capital to expand, but can also be done by large...
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