Legal person allotment and issuance method

Private Placement

A private placement, in investment terms, is the sale of securities not to the public, but to select investors. Such a form of capital raising may take place without the need to register the issued securities with the financial authorities. Private placement is a type of offering made when companies enter the venture capital process with their transactions conducted through private market and investors consisting mostly of venture capital firms, angel investors, and high net worth individuals.

Private placements can run from relatively small offerings totaling a few million dollars up to billion-dollar transactions. Private placements can offer an alternative means to raise money and gain access to capital markets without facing the costs and regulations of public offerings and the arduous process of more traditional forms of financing.

Investors interested in taking the risk of private placements should undertake adequate research and due diligence regarding the company, requirements by the company and terms of the offering to ensure that the investment is suitable for the investor.

Private placements are typically exclusive, and investors must rely on channel and professional networks to gain access. Emerging companies can also find it difficult to enter the private placement and venture capital process. But private placements may offer certain benefits to investors:

The allure of high returns – Private placements are usually associated with relatively high returns due to the associated risks.

Low disclosure requirements – Companies can raise funds by selling shares to investors, with few regulatory disclosure requirements.

Opportunity for diversification – Since it is a private investment, fewer investors are involved, making it easier to diversify a portfolio.

Access to private companies – Many investors want access to companies that are not listed on public exchanges. Private placements allow investors to gain access to these companies.

Despite the many advantages of private placements, investors should be aware that they are often more risky investments than those offered on public exchanges. It is therefore important to thoroughly research the private placement company, its financial situation, and any related business risks before making an investment. It is also important to understand the terms of the offering and be aware of any potential conflicts of interest that may exist. As with any investment, investors should be aware that there is a risk of loss associated with private placements.

Emission of public offering equity by legal person means that the issuer, usually a shareholder of the issuer or an investment institution authorized by the issuer, uses its own name to spread resources to the public and conduct the issuance and distribution of the companys shares. The legal person emission of the public offering equity has formed a relatively mature mechanism, which is widely adopted by Chinese companies.

The main advantages of legal person public offering equity are as follows: First, the offering price of the stock is more reasonable; second, the capital cost is lower than private offering, and the issues disclosure is more detailed; third, the marketing cycle is shorter; fourth, the expanded financing channels are broader, and investors have a choice.

At present, the legal person public offering equity will mainly include two steps, the public offering and the red chip offering. The aim of the public offering is to maintain the internal equity ratio and realize the profitable disposal of the shares held by the legal person. The red chip phase release is mainly used to diversify the interests of shareholders, increase the margin of the stock price and attract more new shareholders; at the same time, the overall interests of the entire capital market are protected.

In the future, legal person public offering equity will still occupy an important position in the stock market. It is expected to create a more reasonable approach that embodies reasonable benefits, enabling investors to obtain reasonable returns, avoiding excessive speculation and ensuring the healthy development of the capital market.