A private placement is Wall Street's use of a private investment vehicle to raise capital versus a publicly traded investment. The result is the sale of securities to a relatively small number of investors. Investors involved in private placements are usually large banks, mutual funds, insurance companies, pension funds or accredited investors.
Private placements are generally illiquid meaning they cannot be readily sold and do not have a liquid market on which they trade. Private placements may not be subject to registration with the SEC and thus require extensive written disclosures regarding the nature, character and risk factors of the offering. The disclosure documents are often labeled as a Private Placement Memorandum or "PPM."