Private Placement Memorandums (PPM)

The purpose of the Private Placement Memorandum (PPM) is to make full and thorough disclosure to the prospective investors so that the private company is protected from later investor “sour grapes” if the private company goes under and the investor loses his or her investment. The PPM contains detailed information about the private company’s products and services, its financials (including the private company’s income statement, balance sheet, and statement of cash flows — see PrivCo Private Company Knowledge Bank “Terms and Definitions”), and especially what are known as Risk Factors. The section on Risk Factors details everything that could possibly go wrong — from key employees quitting to competition to even acts of war and terrorism disrupting the business. In a nutshell, it can sometimes read like a parade of horrors.