Navigating Disclosure Options for Private Placements: What Issuers Need to Know
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When a company is thinking about launching a private securities offering, one of the first questions that arises is what disclosures are required to be provided by the company to investors. The answer to this question can depend on a number of factors, including 1) the number and type of investors the company is soliciting for the offering, 2) the risk tolerance of the company, 3) the company’s budget for the capital raise, and 4) the size of the offering. This article explains the disclosure options available to companies for private placements and key factors management needs to know when deciding which option is best for them.
State and federal securities laws require issuers to provide investors with full, fair, and complete disclosure of all “material” facts about the offering and the issuer, its management, business, operations, and finances. Information is deemed to be material if a reasonable investor would consider the information important in making an investment decision. While materiality is a difficult concept to define precisely, at a minimum, a fact is “material” if you do not want to disclose the information because if the investors know about it, they would not buy the securities. Facts that are disclosed must be developed fully.
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