Following the ExclusivePurchases.com announcement of a Private Placement offering
- information can be found at -- http://bit.ly/1sfOmTS --
and the changes in SEC rules to make it possible, we received an incredible number of
questions about Private Placements and our Opportunity.
What
is a Private Placement? -- In this Blog I will provide information about Private Placements and point-out the advantages and disadvantages for potential investors.
In
a Linkedin post by Eric Ogi titled "Private Placement of Securities"
on Oct. 30, 2015, he wrote "Private
placement occurs when a company makes an offering of securities to an
individual or a small group of investors. Since such an offering does
not qualify as a public sale of securities, it does not need to be
registered with the Securities and Exchange Commission (SEC) and is
exempt from the usual reporting requirements. Private placements are
generally considered a cost-effective way for small businesses to
raise capital without "going public" through an initial
public offering (IPO)."
Mr.
Ogi went on to write, "A private placement
may also enable a small business owner to hand-pick investors with
compatible goals and interests. Since the investors are likely to be
sophisticated business people, it may be possible for the company to
structure more complex and confidential transactions. If the
investors are themselves entrepreneurs, they may be able to offer
valuable assistance to the company's management. Finally, unlike
public stock offerings, private placements enable small businesses to
maintain their private status."
For
the most part, the above information describes the reasons we at
ExclusivePurchases.com decided to utilize a Private Placement. As
with any investment, there are Pros & Cons to be considered. In terms of the
ExclusivePurchases.com offering, we intend to be transparent and
provide potential investors and investors ongoing information about
the status of ExclusivePurchases.com in the marketplace.
Advantages
of a Private Placement -- While the above points-out
some of the advantages, Investopedia adds the following:
1)
A
limited Number of Regulatory Requirements -- When
a company decides to issue shares of an initial public offering -
rather than a Private Placement, the U.S. Securities and Exchange
Commission requires the company to meet a lengthy list of
requirements.
2)
Saved
Cost and Time -- Equity
financing deals such as initial public offerings and venture capital
often take time to configure and finalize.
3)
Private
Means Private -- The
company's ability to remain a private company. The exemption under
Regulation D allows companies to raise capital while keeping
financial records private instead of disclosing information each
quarter to the buying public.
Disadvantages
of a Private Placement -- Investopedia goes on to
point-out the following disadvantages:
1)
Potential
Loss of Capital -
While risk is inherent to any investment, "Private
placements are companies offering securities in non-public offerings
that are not required to comply with the registration requirements of
federal securities laws. Most companies offering private placements
rely on Regulation D of the Securities Act of 1933 to claim exemption
from the registration requirements."
2) Limited
Information Available About The Issuing Company -
"Information has not been reviewed by any regulatory agency."
3) The
Securities Are Not Liquid -
"Since
the securities are not publicly traded, investors may be forced to
hold the securities for a long time if they are not able to find a
suitable buyer for the securities."
What's Next? - I hope the above has provided some insights into Private Placements! As we prepared the business plan/pitch deck for the ExclusivePurchases.com offering, we provided substantial information to assist potential investors in evaluating the investment and the risk. We also encourage those who are reviewing the Private Placement to contact us with any questions. Questions should be directed to Phil - phil@exclusivepurchases.com
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