Advantages of Private Placement?
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The following are the advantages of private placement.
1. Speeds up financing: A company willing to raise capital through fresh issue by going for public issue of shares has to go through a lot of procedures that will be time consuming. Whereas it becomes easier to raise capital from private placement within a few months.
2. Economical: For public issue of shares, a company has to spend on preparation and printing of prospectus, application forms, transportation and also on advertisement in various forms of media. All these expenses will not be required if a public placement route is selected.
3. Confidentiality: In private placement, the shares are allotted to selected business groups and hence, the whole procedure is confidential, while in a public issue many disclosures need to be made.
4. Market Stability: The private placement market is more stable as compared to the stock market. There is less volatility in the private placement market.
5. Raising small capital: Small amounts of capital can be raised through private placement, whereas public issue is required when the capital requirement is high.