Offerings on the Marketplace have documents related to that specific deal; you find them under the Documents section of the offering’s detail page. These documents are there to help you perform your due diligence and understand your rights and obligations as an investor in a particular offering. You should carefully review each offering in detail and consult with your legal, tax, and financial advisors before making an investment on the Marketplace.
Deals on the Marketplace also have a Private Placement Memorandum (“PPM”) within the documents. In this article, we’ll cover some frequently asked questions about the PPM.
What is a Private Placement Memorandum (“PPM”)?
A Private Placement Memorandum (“PPM”) is a legal document used by privately held companies when seeking to raise money from investors.
What is the purpose of a PPM?
Generally, the PPM provides information about the company offering the deal , a business plan, terms of the deal, and risks related to the deal, amongst other things. The disclosures included in the PPM vary depending on how the deal is structured, any exemption from registration that is being used, and the complexity of the terms.
A PPM is intended for investors and prospective investors to use in their due diligence.
Are PPMs standardized?
No, PPMs will differ between issuers and deals...
What might a PPM include?
Generally, a PPM may include the following (this is not an all inclusive list):
- Introduction
- Summary of offering terms
- Business plan
- Risk factors
- Description of the Company and the Management
- This can include compensation and securities owned by owners and management
- Use of proceeds
- Description of Securities
- Subscription Procedures
- Litigation and Tax Matters
- Restrictions on investors (i.e. resale or transfer)
- Exhibits
How does a PPM differ from an Operating Agreement?
A PPM provides information on the investment opportunity: information about the terms of the deal, the risks of the investment, etc. The Operating Agreement is the governing document concerning the operation of the subject entity.
How does a PPM differ from a Subscription Agreement?
Both the PPM and the Subscription Agreement are legal documents. The PPM describes the company selling the securities, the terms of the offering, and the risks of the investment, amongst other things.
However, the Subscription Agreement is somewhat similar to a purchase agreement: it is the purchase and sale agreement of securities from the issuer to the investor..
For more information about Subscription Agreements, view this article: Subscription agreement overview.