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Why would a company prefer a private placement to a public placement?

Why would a company prefer a private placement to a public placement?

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Expert Solution

Private placement means company selling shares to a group of investors not to public at large . Public Placement means company issue shares to a large public through IPO (IntiaI Public Offering ).

Legal Requirements in Private Placement are very easy as compared to public Placement . In Public Placement , you have to comply with so many legal requirements .

Private Placement saves time and cost because you have to comply with less legal requirements .But In case of Public Placement , It is very time consuming process and costly as well .

In private placement transactions , public disclosures requirements are limited .

In private placement , Investment would not be purchased with the intent to sell to another investor . That means long term relationship with investors .

In Private Placement , there are fewer investors (10-20 ) or single large institutional investor .Easy for company to know their investors . It is very easy for company in private placement to build a strong relationship with their investors.

jeff jeffy answered 1 year ago
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