Definition
Pre-IPO Placement
A pre-IPO placement is a private sale of shares to select investors shortly before a company's public issue, usually at a negotiated price.
Companies use pre-IPO placements to raise capital and bring in marquee investors ahead of the IPO, reducing the size they need to raise from the public and validating the valuation. The deal is struck before the DRHP or RHP and disclosed in the offer document.
Under SEBI rules, shares allotted in a pre-IPO placement are subject to a lock-in (commonly six months from listing for non-promoters who acquire shares in the year before filing). It is distinct from the anchor allocation, which happens just before the issue opens.
Related terms
- Anchor InvestorAnchor investors are large institutional investors who are allotted IPO shares a day before the issue opens to the public, lending credibility to the offering.
- Private PlacementA private placement is the sale of securities to a limited, identified group of investors rather than to the public at large.
- Lock-in (IPO)Lock-in is a period after listing during which certain shareholders are barred from selling their shares.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.