Private Placements

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snaggletooth's picture
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Anyone here have any experience on offering or investing in private placements?  Any triumphet stories? Horror stories?

AllREIT's picture
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snaggletooth wrote:Anyone here have any experience on offering or
investing in private placements?  Any triumphet stories? Horror
stories?

Don't do it. If the company/opportunity was any good they would take it public.

troll's picture
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AllREIT's picture
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joedabrkr wrote:
AllREIT wrote:snaggletooth wrote:Anyone here have any experience on offering or
investing in private placements?  Any triumphet stories? Horror
stories?

Don't do it. If the company/opportunity was any good they would take it public.

Care to back your assertion up with some facts?Being public isn't always a bowl of cherries, especially with all the SarbOx rules.

Being a company with securities offered to the public (and thus registered with the SEC) means pretty much the same reporting burdern as being a public company.

deekay's picture
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AllREIT wrote:snaggletooth wrote:Anyone here have any experience on offering or investing in private placements?  Any triumphet stories? Horror stories?Don't do it. If the company/opportunity was any good they would take it public.
What the hell are you talking about?  If anything, a private company has no compellig reason to go public.  They won't need public financing.
Do you even bother to think before you post?

deekay's picture
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edit:  If anything, a strong private company has no compelling reason to go public.

deekay's picture
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joedabrkr wrote: AllREIT wrote:snaggletooth wrote:Anyone here have any experience on offering or investing in private placements?  Any triumphet stories? Horror stories?Don't do it. If the company/opportunity was any good they would take it public. Care to back your assertion up with some facts?Being public isn't always a bowl of cherries, especially with all the SarbOx rules.
FACTS?!  FACTS?!  AllReit don't need no steeeenkin' FACTS!!!

AllREIT's picture
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deekay wrote:AllREIT wrote:snaggletooth wrote:Anyone here have
any experience on offering or investing in private placements? 
Any triumphet stories? Horror stories?Don't do it. If the company/opportunity was any good they would take it public.
What the hell are you talking about?  If anything, a private
company has no compellig reason to go public.  They won't need
public financing.
Do you even bother to think before you post?

Then why is that company seeking a private placement of its securities?

Do you even bother to think before you post?

deekay's picture
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AllREIT wrote: deekay wrote:
AllREIT wrote:snaggletooth wrote:Anyone here have any experience on offering or investing in private placements?  Any triumphet stories? Horror stories?Don't do it. If the company/opportunity was any good they would take it public.
What the hell are you talking about?  If anything, a private company has no compellig reason to go public.  They won't need public financing.
Do you even bother to think before you post?
Then why is that company seeking a private placement of its securities? Do you even bother to think before you post?
Not tonight.  I'm sick as a dog.  My mistake.
However, you made it seem like all good investment ideas should be public.  Why would a company's management submit themselves to regulatory scrutiny if they don't need to?

snaggletooth's picture
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AllREIT wrote:snaggletooth wrote:Anyone here have any experience on offering or investing in private placements?  Any triumphet stories? Horror stories?Don't do it. If the company/opportunity was any good they would take it public.
Soooo, what you're really trying to tell me is that after all this time, venture capitalists have been wrong because the private company was no good.  Damn, I wish I would've have figured this out a lot sooner...I mean I'm not really interested in possibly making BIG money anyways 

BankFC's picture
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ALLREIT, don't you have some papers to grade?

FreedomLvr's picture
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joedabrkr wrote: Care to back your assertion up with some facts?
Facts?  You can use facts to prove anything that's even REMOTELY true.  Facts shmacts.

Dust Bunny's picture
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Then why is that company seeking a private placement of its securities?
Lots of reasons.
They don't want to go to the expenses and trouble of filing with the SEC until they feel that there is a good market for their stock
They would prefer to have a smaller group of well qualified high net worth investors instead of many common stock holders.
They want to maintain a better control of their company by having non voting investors or a fewer group of voting shareholders
They want to pay larger dividends to smaller more closely held group of investors, which includes the founders of the company
They can more efficently invest the money in their own business and grow the company for future share/stock offerings.
Your reasoning is very flawed.  How do you think companies get started in the first place?  Just jump right out with an IPO and hope that they get enough shares sold so they can begin their company?
So, if you had been offered the opportunity to invest in Berkshire Hathaway, Microsoft, Google  before they went public you would turn it down?

AllREIT's picture
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Dust Bunny wrote:Then why is that company seeking a private placement of its securities?
Lots of reasons.
They don't want to go to the expenses and trouble of filing with the
SEC until they feel that there is a good market for their stock.

Except that if you are offering securities to the public you have to register with the SEC.

They would prefer to have a smaller group of well qualified high net worth investors instead of many common stock holders.

Why? Who cares as long as the check clears.

They want to maintain a better control of their company by having non voting investors or a fewer group of voting shareholders.

Control = %age of total vote. How the securities get sold and who owns them has no bearing on this.

If the founders insist on keeping control, the company can adopt a class A/B structure.

They want to pay larger dividends to smaller more closely held group of investors, which includes the founders of the company
Nonsense, The dividend is spread out
according to the ownership of the company. How the ownership of the
company that is not held by founders is dispersed has no bearings on
dividends.

They can more efficently invest the money in their own business and grow the company for future share/stock offerings.

Again, why do the private placement over a public offering.

Underwriting expenses for private placements run about 8% vs 4% for public offerings.

Your reasoning is very flawed.  How do you think companies get
started in the first place?  Just jump right out with an IPO and
hope that they get enough shares sold so they can begin their company?
So, if you had been offered the opportunity to invest in Berkshire
Hathaway, Microsoft, Google  before they went public you
would turn it down?

A strawman argument. None of those companies ever did broker sold private placements.

troll's picture
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BankFC wrote:ALLREIT, don't you have some papers to grade?
Funny.

troll's picture
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AllREIT wrote: Dust Bunny wrote:
Then why is that company seeking a private placement of its securities?
Lots of reasons.
They don't want to go to the expenses and trouble of filing with the SEC until they feel that there is a good market for their stock.
Except that if you are offering securities to the public you have to register with the SEC.
They would prefer to have a smaller group of well qualified high net worth investors instead of many common stock holders.
Why? Who cares as long as the check clears.
They want to maintain a better control of their company by having non voting investors or a fewer group of voting shareholders.
Control = %age of total vote. How the securities get sold and who owns them has no bearing on this.
If the founders insist on keeping control, the company can adopt a class A/B structure.
They want to pay larger dividends to smaller more closely held group of investors, which includes the founders of the company
Nonsense, The dividend is spread out according to the ownership of the company. How the ownership of the company that is not held by founders is dispersed has no bearings on dividends.
They can more efficently invest the money in their own business and grow the company for future share/stock offerings.
Again, why do the private placement over a public offering.
Underwriting expenses for private placements run about 8% vs 4% for public offerings.
Your reasoning is very flawed.  How do you think companies get started in the first place?  Just jump right out with an IPO and hope that they get enough shares sold so they can begin their company?
So, if you had been offered the opportunity to invest in Berkshire Hathaway, Microsoft, Google  before they went public you would turn it down?
A strawman argument. None of those companies ever did broker sold private placements.

The fact that you've never read a PPM is no longer a secret.

Dust Bunny's picture
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They don't want to go to the expenses and trouble of filing with the SEC until they feel that there is a good market for their stock.
Except that if you are offering securities to the public you have to register with the SEC.
Private placement occurs when a company makes an offering of securities not to the public, but directly to an individual or a small group of investors. Such offerings do not need to be registered with the Securities and Exchange Commission (SEC) and are 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).
 
So, if you had been offered the opportunity to invest in Berkshire Hathaway, Microsoft, Google  before they went public you would turn it down?
A strawman argument. None of those companies ever did broker sold private placements.
http://pages.stern.nyu.edu/~igiddy/cases/berkshirecase.htm
Of course they did and still do in some cases.

Dust Bunny's picture
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May 2002  "The new Berkshire Hathaway securities, which were underwritten by Goldman, Sachs at the suggestion of Mr. Buffett, Berkshire's chairman and chief executive, pay 3 percent annual interest. But they are coupled with five-year warrants to buy Berkshire stock at $89,585, a 15 percent premium to Berkshire's stock price Tuesday of $77,900. To maintain the warrant, an investor is required to pay 3.75 percent each year. That provides a net negative rate of 0.75 percent."
Even with the negative .75% interest rate(which was paid for in the initial purchase by a tagged on zero bond), this would have been a pretty sweet deal with the stock over $110,000 today.    Of course these were only to institutional investors, but a private placement none the less.

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