What exactly is a private placement memorandum

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A private placement as a "Public Placement" can be used to raise capital to improve liquidity in the company with a BaFin-free "Private Placement Memorandum" or in short as an investment fact sheet or with a BaFin-approved sales prospectus. Dr. Horst Siegfried Werner defines private placement as a public company participation offer of financial market instruments (in detail www.finanzierung-ohne-bank.de) in the form of securities or investments (= non-securitized participations) as a means of financing to an indefinite number of investors and capital providers or to a wide range of investors outside the stock exchange (often also referred to as pre-IPO). The term private placement comes from the area of ​​the investment and capital market. It is a specified distribution term for capital investments on the bank-independent private channels. The desired result of a private placement is the non-bank raising of risk capital to finance the issuing company. The successful completion of a private placement gives the company the chance of additional liquidity as supplementary equity, while the investor or investor takes on a certain investment risk or investor investment risk up to a conceivable total loss of his capital. With private placements, this risk is always offset by an increased opportunity for returns.

The private placement takes place on the free, unregulated capital market via the free capital investment distribution or through a direct placement. In a very small framework with small participations (from EUR 100, -) one speaks of the so-called. Crowdfunding, which is a mini form of private placement. In contrast, a stock exchange placement or stock exchange going public is referred to as an initial public offering (= IPO) with a corresponding official stock exchange admission and placement sales via investment or securities trading banks or financial services institutions with an authorization according to Section 32 of the German Banking Act (KWG). . The non-public sale of investments to previously selected investors, in which the investment products are not offered publicly, but only directly to certain groups, e.g. large investors, etc., is not a private placement in the sense of the term.

Just like an IPO, the form of a private placement is a public offering of participation and subscription by the company to the general public and the sale of investments to a broad investor base. It is thus to a certain extent a "public placement" outside the stock exchanges on the free capital market, which has been legally regulated by the sales prospectus laws since July 1, 2005 and is transparent due to the legally prescribed announcements in the mandatory stock exchange gazettes. The Sales Prospectus Act on securities-free investments (VerkProsG in the version of June 1, 2012) and the Securities Prospectus Act with the major changes of July 1, 2012 apply. As with an IPO, certain statutory capital market rules must be observed for a private placement on the over-the-counter investment market. These rules result from the capital market laws, the aforementioned sales prospectus laws and the German Banking Act (KWG).

In particular, § 1 KWG must be observed, according to which the capital market products of companies may not be "fixed repayable monies". A private placement of corporate loans in a wide range is therefore not permitted, as this would be deposit transactions that only banks are allowed to conduct. The so-called are excluded. Subordinated loans that may be issued and placed without a prospectus. Here, however, there are problems of delimitation from the banks' lending business, which BaFin intends to clarify in a fundamental decision announced at the end of August 2012.

In the practical implementation, the private placement issuer must know that a private placement without a stock exchange can only be brought to success with a great deal of hard work. Because a private placement represents an "own issue" which means "own" work in financial marketing and in addressing investors and financial service providers as multipliers. The company must be able to "present and sell itself with its equity story". In contrast, there is the "foreign issuance" via the banks on the stock exchanges as a regulated capital market.

Successful private placements for companies are carried out by Dr. Horst Siegfried Werner as a private placement expert for raising capital with innovative company investments in the private investor market for SMEs. Such private placements by service, commercial and manufacturing companies are continuously published on the website www.investorenbriefe.de as examples of success. The private placement specialist Dr. Horst Siegfried Werner is constantly working on current placement offers for medium-sized companies with his network partners from Dr. Werner Financial Service Group. The participation concept and the participation agreements are drawn up for the companies. The companies are presented with their business model and their future prospects when they go private on the over-the-counter capital market. The placement messages produced in private placement by medium-sized companies from all sectors as financial marketing inform investors about the respective new participation and return offers. Private placement information is of great importance to capital providers, investors and investment companies for their investment activities. Private investors are addressed by means of a legally prescribed capital market prospectus or, in the case of a BaFin-free and prospectus-free capital raising, with a so-called. Private placement memorandum as an investment exposé.

The right time to start a private investment: Inappropriate or incalculable times for an over-the-counter capital market issue are not to be expected in the case of a private placement as a means of raising capital outside the stock exchange markets, as is the case with a stock exchange offering. With a private placement, the problem does not usually arise after the right time to start the placement. This is because the duration of capital acquisition on the over-the-counter capital market is always designed for a longer period than the short bookbuilding phase that is usual for an IPO. When going public, unfavorable events on the capital markets or currency markets (financial market crisis 2008/2009), political crises or natural events such as the recent earthquake in Japan can interfere. Experience has shown that around six months to a year must be expected for a private placement, and 1 to 3 years for larger volumes of EUR 50 million and more for the full placement.

In detail, reference is made to the textbook by the capital market expert Dr. Horst Siegfried Werner "Pre-IPO - The private placement for raising capital", in Bank-Verlag-Medien GmbH, Cologne, 2nd edition, 184 pages.