Private Placements
Private placements are an attractive source of equity capital for a private company that for whatever reason has ruled out the possibility of going public. If the goal of the company is to raise a specific amount of capital in a short time, this equity source may be the answer. In this transaction, the company offers stock to a few private investors, rather than to the public as in a public offering. A private placement requires lit¬tle paperwork compared to a public offering.
If the company's management team knows of enough investors, then the private placement could be distributed among a small group of friends, family, relatives, or acquaintances. Or the company may de¬cide to have a broker circulate the proposal among a few investors who have expressed an interest in small companies. The following four groups of investors might be interested in a private placement:2'