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Private Placements for Broker-Dealers

Posted on January 25, 2019 at 1:20 AM Comments comments (0)

Some startups try to engage a registered broker-dealer to help them raise capital in a private placement offering.

Who is a registered broker-dealer?

A registered broker-dealer is a financial intermediary registered with the SEC and Financial Industry Regulatory Authority (FINRA). “Broker” means that the firm can sell securities for clients and “dealer” means the firm can sell securities for itself. Money is earned with fee-based services and from commissions on capital raised.

How can a broker-dealer help?

Not all broker-dealers work on private equity offerings. But a broker-dealer who likes your private placement may have investors and investment networks with lists of pre-qualified Accredited Investors. They also may have ties to investment banks, venture capital firms or private equity firms. Also, some broker-dealers assist you in crafting a PPM, term sheet, pitch deck, and other documents. They may even be willing to make presentations on your behalf.

Finally, investors’ perceptions may be altered in favorable way. They may assume there is less risk if the financial intermediary has done its own due diligence before agreeing to work with the issuer.

Why doesn’t everyone use broker-dealers?

First, they do not want to work on most private placements. Second, they have to be paid.

More questions? Email [email protected]

State Securities Regulators

Posted on August 2, 2016 at 7:45 PM Comments comments (0)

Each state has its own securities regulatory scheme to enforce that state’s blue sky laws covering the sale of securities and those who sell them. These laws cover the same activities the SEC regulates but on an intrastate basis. You can find out who your state securities regulator is by visiting the website of the North American Securities Administrators Association, Inc.

Start Up Money Using the JOBS Act

Posted on July 27, 2016 at 2:15 AM Comments comments (0)

Want to use SEC Rule 506(c), Rule 506(b, Rule 504, or Regulation A to raise start up money?

 

Our turnkey documentation includes:

 

· Private Placement Memorandum with topic-specific “Risk Factors” and “Forward-Looking Statements”

· Professional subscription agreement

· Accredited Investor Verification Letter

· Non-Disclosure Agreement

 

Private Placement Advisors LLC provides JOBS Act solutions for both start ups and investors

Public v. Private

Posted on July 29, 2015 at 9:05 PM Comments comments (0)

Companies decide to list on the exchanges to tap the public markets for capital, unlock liquidity for shareholders, pay off debt, and introduce the company to new investors. Despite these benefits, most companies decide that they are better off remaining private.

 

You can see that fewer companies are going public by looking at the Wilshire 5000 index. The index was created by Wilshire Associates in 1974 as a way to track the 5000 public companies and benchmark the U.S. stock market. The Wilshire 5000 had shrunk to a membership of 3,818 as of September, 2014, showing how fewer companies are listing their shares on the public market. The last time the Wilshire 5000 index had under 5,000 issuers was in 2005.

 

Twitter provided IPO nay-sayers with reasons against going public. The social networking company went public in a public offering that saw Twitter’s stock price jump 73% in its inaugural day of trading. Twitter has suffered stock downgrades, a sagging stock price, and various criticisms of its business and management.

 

One of the biggest drawbacks to going public is the need to exceed Wall Street’s quarterly expectations and constant speculation from investors. Private companies do not have to file public financials and investors are often more concerned with long-term performance than jumping in and out of exchange-listed issuers.

 

In the event that a privately-held company does fail to meet investor expectations, shareholders express their discontent in private and, even if they do comment in the press, it rarely gains the level of attention that a comment on a publicly-traded company garners. A public company takes on significant expenses in staffing the IR department, completing audits, filing documents and reports with the SEC, and complying with regulatory requirements.

 

The decision to remain private has become an increasingly easy one. It has become more and more unattractive to go through the initial filing process, comply with public company requirements, accommodate short-term minded public investors, conduct earnings calls, regularly answer for (under)performance, and go through all the other duties required of public companies. Furthermore, the growth and evolution of the secondary market has reduced the need to tap the public markets for capital, the biggest motivation to go public. The secondary market, which is populated by institutional investors, family offices, venture capitalists, and other qualified investors, is unlocking liquidity for early investors in private companies.

 

There has been a shift by private equity investors toward primary financing or through secondary transactions. Companies are more and more voting for financing through private fundraising rounds and facilitating secondary transactions for current shareholders.