What distinguishes a private placement from a public offering?

A private placement is distinguished from a public offering primarily by the participation of investors. In a private placement, only accredited investors—typically high-net-worth individuals or institutional investors—are allowed to participate in the offering. This is due to the nature of private placements, which are not subjected to the same rigorous regulatory requirements as public offerings. Consequently, private placements can be done more quickly and with less expense, as they are not required to file with the SEC in the same way that public offerings are.

This exclusivity in investor participation is a key feature that separates private placements from public offerings, where securities are sold to the general public and must be registered with the SEC and subject to extensive disclosure requirements. In contrast, private placements rely on the sophistication and financial strength of accredited investors to ensure they are capable of understanding and bearing the risks involved.