What is a Private Placement Memorandum (Reg D Offering)?

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 shares 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 the shares of stock. This is the document that the investor will sign and send in with their 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 other information presented to the investor for them to make an accurate investment decision. Many companies will attach their business plans to the PPM as supporting documentation. This is an acceptable practice so long as the information in the business plan properly corresponds with the information in the PPM and that the investor is made aware that the business plan alone does not constitute an offer to sell securities – only the PPM can make that offer.