Definition
Private Placement
A private placement is the sale of securities to a limited, identified group of investors rather than to the public at large.
Under the Companies Act, a private placement can be made to a capped number of identified persons in a financial year, with funds received only through banking channels and shares allotted within a set time. It is faster and less costly than a public issue but cannot be advertised to the public.
Startups, unlisted firms and even listed companies use private placements (including preferential allotments and QIPs) to raise capital from institutions and accredited investors. SEBI and the Companies Act set the disclosure and procedural requirements.
Related terms
- Preferential AllotmentPreferential allotment is the issue of shares or convertibles by a listed company to select investors on a private basis, subject to SEBI pricing rules.
- Pre-IPO PlacementA pre-IPO placement is a private sale of shares to select investors shortly before a company's public issue, usually at a negotiated price.
- Qualified Institutions Placement (QIP)A QIP is a fast way for a listed company to raise capital by selling shares only to qualified institutional buyers, without a full public offer.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.