A Private Placement Memorandum (PPM) is a vehicle for raising cash for a company by selling shares or other securities in the company. A PPM is a legal document that describes the investment to potential investors with the goal of raising funds. It identifies the entity selling the shares, explains the terms of the offering (thus the name “offering memorandum”), and reveals the investment’s risks.
A PPM is not essentially a marketing item, despite the fact that it is intended to raise funds. Instead, it should be made up of actual facts that openly disclose the company’s recognized dangers. This should explicitly state all aspects of the business, including administration, an overview of the products or services offered, product and economic projections, financial statements, management biographies, planned use of funds raised through the giving, prior performance, and anything else a prospective investor may also need to know before deciding whether he or she should invest in a company.
Nothing in the PPM should be deceptive or untrue. Any information supplied to investors, according to Rule 10b-5 of the Federal Securities Exchange Act of 1934, “must be true and may not omit any material facts necessary to prevent the statements made from being misleading.”
- Summary of the service
- Information and concerns regarding capitalization
- Risk Factors – both general and company-specific
- The firm and its management are described in detail.
- The following is a description of how the funds will be utilized (including compensation of founders from the proceeds)
- Securities descriptions (class, attributes, etc.)
- Investing instructions for the offering
- Showcases (investment contracts, financial statements, and organizational documents)
The initial P in PPM stands for “private,” which means that this information is normally not available to the general public. You only give it to pre-screened investors who you believe would be interested in buying a piece of your company.