Table of Contents:
PRIVATE PLACEMENTS/ REGULATION D OFFERINGS
A private placement is a sale of securities that is made to a group of accredited investors and the securities are not offered to the general public. Accredited investors include institutional investors and individuals who:
• Earn at least $200,000 per year if single; or
• Earn at least $300,000 jointly with a spouse;
• Have a net worth of at least $1,000,000, excluding the primary residence.
Sales to nonaccredited investors are limited to 10 in any 12-month period. No commission may be paid to representatives who sell a private placement to a nonaccredited investor. All investors in private placements must hold the securities fully paid for at least 6 months.
PRIVATE INVESTMENT IN A PUBLIC EQUITY (PIPE)
Public companies that wish to obtain additional financing without selling securities to the general public may sell securities to a group of accredited investors through a private placement. The accredited investors in most cases will be institutional investors who wish to invest a large amount of capital. Common stock, convertible or nonconvertible debt, and rights and warrants may all be sold to investors through a PIPE transaction. Obtaining capital through a PIPE transaction benefits the public company in a number of ways:
• Reduced transaction cost.
• Term disclosure only upon completion of the transaction.
• Increased institutional ownership.
• Quick closing.
Securities sold through a PIPE transaction are subject to Rule 144.
RULE 147 INTRASTATE OFFERING
Rule 147pertainsto offerings of securities that are limited to one state. Because the offering is being made in only one state, it is exempt from registration with the SEC and is subject to the jurisdiction of the state securities administrator. In order to qualify for an exemption from SEC registration, the issue must meet the following criteria:
• The issuer must have its headquarters in that state.
• 80% of the issuer's income must be received in that state.
• 80% of the offering's proceeds must be used in that state.
• 80% of the issuer's assets must be located in that state.
• 100% of purchasers must be located in that state.
• Purchasers must agree not to resell the securities to an out-of-state resident for nine months.
• If the issuer is using an underwriter, the broker dealer must have an office in that state.