ABSTRACT
An off ering memorandum is a legal disclosure that provides potential buyers of a private placement with information relating to the objectives, terms, and risks of the placement. Th is disclosure protects the issuer from legal liabilities that may otherwise fl ow from nondisclosure, while simultaneously generating interest and reducing uncertainty in the placement. By increasing information and reducing uncertainty, the risk premium associated with the placement is reduced and a higher price is commanded. Sometimes called private placement memoranda, these equivalents to prospectuses in public securities satisfy securities regulations but typically do not substitute for the due diligence a buyer would exercise in their decision to purchase a private placement. However, since private placements do not have the same level of regulatory scrutiny, there is a heightened role of an off ering memorandum in providing the information sought by potential investors. Since private placements typically attract experienced and diversifi ed investors, the investor’s reliance on the off ering memorandum is typically less than would be the case in more arms-length, publicly traded new issues. Indeed, while the off ering memorandum may provide the investor with the objectives of the enterprise, the prudent investor will usually conduct their own de novo analysis.
