Private Placement Memorandum
PPM.net writes Private Placement Memorandums (PPM) for both the US and international markets, including for offshore funds. We have solid experience drafting PPMs for nearly 100 jurisdictions worldwide, mostly for private placement offerings, but often for public listings as well.
What is a Private Placement Memorandum?
A Private Placement Memorandum (PPM), also known as an Offering Memorandum, or Private Offering Memorandum, is a document specifically intended for those seeking capital to disclose their company’s information. In the case of a Private Placement Memorandum for the sale of securities such as stocks or bonds, information will need to be disclosed regarding the pros and cons of investing with that particular company. A PPM should contain several important features that will allow an investor to make an educated decision almost on the spot whether to invest, including, but not limited to:
- Cover Page
- The Offering Term Sheets
- Investor Suitability Standards
- Securities Legends
- Risk Factors
- Capitalization of the Company
- Use of Proceeds
- Management Team
- Business Summary
- Subscription Agreement
- Blue Sky and Country Jurisdictional Legends
- And much more….
PPM – Various Meanings
A “PPM” or private placement memorandum is also referred to as offering document or offering memorandum. This is a legal document that acts as a security document in a business and is also given to the potential investors when they are planning to sell shares or stocks. Private Placement Memorandum is used basically during those transactions when the securities have not been registered under either state law or federal law, rather these are sold with the help of any of the exemptions from registration. Private Placement Memorandum basically explains various features in detail like the company that is planning to sell the securities, various investment risks, the terms and conditions of the offering, and many more aspects of the transaction. Private Placement Memorandum also explains disclosures that are involved and their variation depending on the factors like the target customers, which registration exemption being used, the complexity of the offering terms and more.
There is a marked difference between a PPM and a Business Plan. Where the business plan actually acts as a marketing document, the creation of which is necessary for the promotion of the company, the Private Placement Memorandum is basically a disclosure document. In business plans, information about any future growth plans of the company are mentioned, pertaining to customer profiles, outlining market demand, revenue channels, competitive landscape and prospective strategic partners. Conversely, PPM is not persuasive, though it is descriptive in style. The information offered in this document help the investor make a sound judgement about the merits and demerits of the investment.
When making a PPM presentation, the information is imparted in a concrete and factual manner. Any risks faced by the company, whether external or internal are addressed in the document. Thus, PPM fulfil marketing objectives, albeit indirectly, provided it is thorough and highly professional in nature. If a PPM document is drafted in a perfect manner, disclosure requirements would be well balanced and the deal will be easily sold with the help of myriad marketing elements.
When drafting a Personal Placement Memorandum, there are certain factors that need to be taken into consideration. The most important factor being the compliance with the federal securities laws. There must be no inclusion of any misleading or false statements about the company, the offering and the securities being offered. The prospective investor must have all the information necessary that helps in taking a correct decision regarding the management, business, future prospects and past financial performance. The document must also include information about the possible risks. When filing the document, information must be filled accurately and correctly. Experienced investors can always comprehend these disclosures and taking care of “legalese” will display a thorough professional approach adopted by the company. Besides disclosing information that is necessary as far as compliance with the applicable laws are concerned, it is always better to offer more disclosures than legally required. The typical PPM includes Introduction, Summary of Offering Terms, Risk Factors, Management and company Description, Use of proceeds, Securities Description, Subscription Procedures and Exhibits.