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The Private Placement Memorandum (PPM)
The private placement memorandum (PPM) is the document that
discloses everything the investor needs to know to make an informed
investment decision. This includes: 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. The PPM also includes the subscription agreement which is the actual "sales contract" for
the shares of stock. This is the document that the investor will sign and send in with their investment funds.
The PPM is very 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. Many companies will attach their business plans 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.
Private Placements or private stock offerings are “private” equity transactions and are considerably less expensive to complete
than an initial public offering such as an IPO. With the PPM you are still a private company and not yet public.
The Subscription Agreement
The Subscription Agreement is the “buy” document executed by the investor and returned to the Company that establishes their
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.”
Regulation D Offerings
The Securities Act of 1933 spawned Regulation D or Reg D. Reg D sets forth some of the categories of Private Placements,
specifically; 504, 505 and 506 offerings. The purpose of Reg D is to ensure that growing companies are able to compliantly
handle an infusion of fractional investment capital from a group of individual investors
Simply stated, the company can offer a private equity stake to a group of investors that combine their capital to buy a portion of
the company (creating a security in the process because they are buying components of a whole). Whether companies are
seeking start-up capital or desire to raise equity with the intention of launching an Initial Public Offering or IPO at a later date,
there is no other form of financing as flexible and consistently proven as a Reg D offering.
The PPM should include the following sections:
SEC disclaimer
Name of Company
Share price evaluation
Date of Share subscription
Subscription Amount
Introduction to the PPM
Name of potential investor and unique number identifier
SEC non-registered notices
Table of Contents
Summary of Private Placement Memorandum
The Company – Description of company and products
Market – Target market description
Competition – Overview of primary competitors
Location & Facilities – Overview
Management/Personnel – Name and Title
Summary Description of Securities Offered
Securities Offered
Shares Offered
Price per Share
Common Shares Outstanding before the Offering
Common Shares Outstanding after the Offering (Minimum / Maximum)
Use of Proceeds
Summary of the Terms of Offering
The Offering
Minimum Investment
Closings
Suitability
Subscription Agreement
Shareholders Agreement
Risk Factors
Risk Related to Business
Risk Related to Industry
Risk Related to the Offering
Use of Proceeds
Dividend Policy
Capitalization
Dilution
Balance Sheet
Projections in the Business Plan
Business
Description of the Business
Legal Proceedings
Management
Executive Officers and Directors
Board of Directors
Board of Advisors
Compensation of Directors and Board of Advisors
Executive Compensation
Stock Option Plan
Limitation of Liability of Directors and Officers
Principal Stockholders
Description of the Securities (Series A Convertible Preferred)
Voting
Conversion
Liquidation
Dividends
Issuance of other Series of Preferred Shares
Shareholders Agreements
Description of the Other Classes of Shares
Capital Stock
Voting
Dividends
Liquidation
Issuance of Other Series of Preferred Shares
Restrictive Share Transfer Agreements
Tax Considerations
Terms of the Offering and Investor Suitability Standards
The Offering
Investor Qualifications
Subscriptions
Underwriting
Legal Matters
Available Information
The private placement memorandum (PPM) is the document that
discloses everything the investor needs to know to make an informed
investment decision. This includes: 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. The PPM also includes the subscription agreement which is the actual "sales contract" for
the shares of stock. This is the document that the investor will sign and send in with their investment funds.
The PPM is very 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. Many companies will attach their business plans 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.
Private Placements or private stock offerings are “private” equity transactions and are considerably less expensive to complete
than an initial public offering such as an IPO. With the PPM you are still a private company and not yet public.
The Subscription Agreement
The Subscription Agreement is the “buy” document executed by the investor and returned to the Company that establishes their
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.”
Regulation D Offerings
The Securities Act of 1933 spawned Regulation D or Reg D. Reg D sets forth some of the categories of Private Placements,
specifically; 504, 505 and 506 offerings. The purpose of Reg D is to ensure that growing companies are able to compliantly
handle an infusion of fractional investment capital from a group of individual investors
Simply stated, the company can offer a private equity stake to a group of investors that combine their capital to buy a portion of
the company (creating a security in the process because they are buying components of a whole). Whether companies are
seeking start-up capital or desire to raise equity with the intention of launching an Initial Public Offering or IPO at a later date,
there is no other form of financing as flexible and consistently proven as a Reg D offering.
The PPM should include the following sections:
SEC disclaimer
Name of Company
Share price evaluation
Date of Share subscription
Subscription Amount
Introduction to the PPM
Name of potential investor and unique number identifier
SEC non-registered notices
Table of Contents
Summary of Private Placement Memorandum
The Company – Description of company and products
Market – Target market description
Competition – Overview of primary competitors
Location & Facilities – Overview
Management/Personnel – Name and Title
Summary Description of Securities Offered
Securities Offered
Shares Offered
Price per Share
Common Shares Outstanding before the Offering
Common Shares Outstanding after the Offering (Minimum / Maximum)
Use of Proceeds
Summary of the Terms of Offering
The Offering
Minimum Investment
Closings
Suitability
Subscription Agreement
Shareholders Agreement
Risk Factors
Risk Related to Business
Risk Related to Industry
Risk Related to the Offering
Use of Proceeds
Dividend Policy
Capitalization
Dilution
Balance Sheet
Projections in the Business Plan
Business
Description of the Business
Legal Proceedings
Management
Executive Officers and Directors
Board of Directors
Board of Advisors
Compensation of Directors and Board of Advisors
Executive Compensation
Stock Option Plan
Limitation of Liability of Directors and Officers
Principal Stockholders
Description of the Securities (Series A Convertible Preferred)
Voting
Conversion
Liquidation
Dividends
Issuance of other Series of Preferred Shares
Shareholders Agreements
Description of the Other Classes of Shares
Capital Stock
Voting
Dividends
Liquidation
Issuance of Other Series of Preferred Shares
Restrictive Share Transfer Agreements
Tax Considerations
Terms of the Offering and Investor Suitability Standards
The Offering
Investor Qualifications
Subscriptions
Underwriting
Legal Matters
Available Information
| The SEC Elements for a Securities Offering |
| PPMPro - Private Placement Memorandum |
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Custom Designed PPM and SEC Form D Filing
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| 904.794.4252 rch@ppmpro.com |