Private Placement Memorandum (PPM)
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View a private placement memorandum
What is a Private Placement Memorandum or PPM?
The Private Placement Memorandum (PPM) is the document that discloses everything the investor needs to know to make an informed investment decision prior to investing in a Regulation D Offering. Unlike a Business Plan the PPM details the investment opportunity, disclaims legal liabilities and explains the risk of losses.
The PPM is important because it provides the investor with all of the prescribed data they will need to make an investment decision and includes the actual documentation to effect the investment transaction. PPMs are designed as a stand-alone document - meaning that there need not be other information presented to the investor for them to make an accurate investment decision.
Private Placements or Private Stock Offerings are “private” equity/debt transactions and are considerably less expensive to complete than an initial public offering such as an IPO (for the purpose of raising capital).
What Should be Included in a Private Placement Memorandum?
A PPM provides the offering structure, the share structure of the company, SEC disclosures about the shares being purchased, company information, information on company operations, risks involved with the investment, management information, use of proceeds, information on certain transactions that could affect the investor, and investor suitability data. A typical PPM will include the following sections:
- IMPORTANT NOTICES
- JURISDICTIONAL (NASAA) LEGENDS
- SUMMARY OF THE OFFERING
- THE COMPANY
- TERMS OF THE OFFERING
- PLAN OF DISTRIBUTION
- DESCRIPTION OF SECURITIES
- USE OF PROCEEDS
- CAPITALIZATION STATEMENT
- MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- FIDUCIARY RESPONSIBILITIES OF THE DIRECTORS AND OFFICERS OF THE COMPANY
- RISK FACTORS
- PRINCIPAL SHAREHOLDERS
- HOW TO INVEST
- INVESTOR SUITABILITY REQUIREMENTS
- FORECASTS OF FUTURE OPERATING RESULTS
Even if your capital raise will only involve one or two investors, you still need to provide the proper disclosures and investment agreements required to raise capital. Use our PPM Templates to save time, money and stay compliant!
The Private Placement Memorandum also includes the Subscription Agreement which is the actual "sales contract" for the shares of stock being placed. This is the document that the investor will sign and send in with their investment capital.
The Subscription Agreement is the “buy” document executed by the investor and returned to the Company. Attached to this document is the Investor Questionnaire; which establishes the investor sophistication and accredited status.
Just as the PPM provides disclosure to the client regarding the company’s financial status,the Subscription Agreement provides full disclosure to the company regarding the investor’s financial status. In the Subscription Agreement the investor provides assurances to the issuing company that an absolute loss of their investment capital will in no way impact their standard of living or jeopardize their financial picture as a whole. These qualified investors are typically referred to as “accredited investors.”
Other Documents and Attachments
Many companies will attach their business plan, financial statements, articles of incorporation and other documents, to the PPM as supporting documentation. This is an acceptable practice so long as the information in the business plan properly corresponds with the information in the PPM and that the investor is made aware that the business plan alone does not constitute an offer to sell securities - only the PPM can make that offer.
Find a PPM Template for Your Offering:
We have PPM Templates for Debt, Equity, Debt Convertible and even a Combo Debt/Equity