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Differences in Private Placements and Public Offerings - Coursework Example

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The paper "Differences in Private Placements and Public Offerings" highlights that many other differences can also be found by conducting a more detailed analysis but it is a fact that almost all of the publicly offered products are under CSRC`s supervision…
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Differences in Private Placements and Public Offerings
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Download file to see previous pages Two types of basic methods are used by companies to offer those to investors. One of the methods used for this is called Initial Public Offering (IPO) or Public Offering. In this particular method, securities are offered for sale to the general public. Anyone can be an investor in the case of the initial public offering. Actually it is the first time when a corporation starts to offer registered security to the public. This practice helps companies to get immediate cash to increase their equity base along with positively affecting the stock value appreciation (Initial Public Offering (IPO).
Private Placement is the other method used to offer securities. The basic difference in this particular method as compared to the other one is about selling the shares without the involvement of intermediary of a stockbroker.
Both these methods are used in real-world to achieve different types of objectives. Actually, the use of a particular method is directly related to the situations being faced by a corporation. By contemplating more on the details related to both these methods, it becomes quite evident that there are quite a few differences, advantages and disadvantages of using a particular method. A critical comparison of both these methods will help you to understand those advantages and disadvantages in a much better way.
Let's start off with Public or Initial Public...
It is the duty of the SEC to set regulations and specific standards for the investment market to function in the right way. Due to these standards and regulations, it is essential for a corporation to reveal a lot of information before making any offers. The information may be about inner workings of a corporation and the plan about using the funds obtained through the offering. Here, a corporation has to wait for the approval of SEC after setting a sales price for the offering along with providing the other necessary information.
Now when you will compare this particular aspect of providing extensive information to SEC with the other method of Private Placement, you will understand why this other method is preferred by most of the corporations. Herein, such securities can be offered which may not be registered with SEC. What it means is that there will be no need to provide extensive information to the Securities and Exchange Commission, which is unlike IPO. Since companies making use of this method exploits the Securities Act of 1933, there remains no need to follow the rule of quarterly reporting. But, it is significant to mention that a Private Placement Memorandum (PPM) is not exempt from Anti-fraud provisions and state law. It implies the fact that though there will be no need to provide as many details as required in Public Offering you will have to disclose enough information so an investor may become able to make an informed and rational decision.
Apart from this particular aspect, it is important to compare the basic way in which both these methods actually work. While comparing the working process of both these methods, it is easy to see a few important differences.  ...Download file to see next pagesRead More
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