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A securities offering exempt from registration with the SEC is sometimes referred to as a private placement or an unregistered offering. Under the federal securities laws, a company may not offer or sell securities unless the offering has registered with the SEC or an exemption from registration is available.
Example #1 Company A has been suffering from a financial crisis for a few months. However, it plans to sell some of its shares to raise funds quickly to pay its debts. It decides not to invite all investors as it will likely consume more time.
What Is Private Placement? Private placement is a common method of raising business capital by offering equity shares. Private placements can be done by either private companies wishing to acquire a few select investors or by publicly traded companies as a secondary stock offering.
Under the Securities Act of 1933, any offer to sell securities must either be registered with the SEC or meet an exemption. Issuers and broker-dealers most commonly conduct private placements under Regulation D of the Securities Act of 1933, which provides three exemptions from registration.
What Is a Private Placement? A private placement is a sale of stock shares or bonds to pre-selected investors and institutions rather than publicly on the open market. It is an alternative to an initial public offering (IPO) for a company seeking to raise capital for expansion.