What Is a “Private Placement Memorandum” and why is it important to raising capital?
A 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 securities 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 purchasing the securities. This is the document that the investor will sign and send with the 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. PPM’s are designed as a stand-alone document – meaning that there need not be
