Private Placements

In a private placement, securities are not offered to the public.

Companies sell securities directly to a group of qualified investors, usually through an investment bank.

Qualified investors are generally those who understand associated risks and have sufficient wealth to withstand significant losses.

Private placements are typically cheaper than public offerings as they do not require as much public disclosures.

However, since privately placed securities do not trade on organized secondary markets, investors require a higher rate of return from them.