A private placement is not a product. It is a method of selling securities privately under an exemption, rather than through a public, registered offering. The “thing you sell” can be many different instruments.
In the United States, private placements are commonly executed under Regulation D, including Rule 506(b) and Rule 506(c), each with conditions around investor eligibility and how the offering can be marketed. For example, 506(b) generally prohibits general solicitation, while 506(c) permits it if the issuer takes reasonable steps to verify accredited investor status. SEC guidance on Rule 506 offerings.
This is the classic private placement: common stock, preferred stock, convertible preferred, or equity with protective provisions, dividends, liquidation preferences, and governance terms. Growth companies, holding companies, and acquisition vehicles often use equity when they want permanent capital and flexibility.
The investor is underwriting ownership economics and governance, not a repayment schedule. Definition of security.
These private placements sell ownership interests in an investment vehicle: limited partnership interests, LLC membership interests, feeder interests, co-invest SPVs, and deal-by-deal special purpose vehicles. This is standard for private equity, private credit, real estate funds, and project SPVs.
These interests are generally treated as securities and require disciplined disclosures and investor suitability controls. Definition of security.
Debt private placements are common in middle market finance: promissory notes, secured notes, unsecured notes, bonds, debentures, and notes with covenants, reporting, collateral, and cash controls. These are frequently sold to private credit funds, family offices, and institutional allocators.
A practical nuance: in US law, “notes” are frequently treated as securities in capital raising contexts, but analysis can depend on facts and structure. Courts have evaluated certain notes under the Reves “family resemblance” framework, which means the label “note” does not always settle the question. Reves v. Ernst & Young (1990).
Many issuers use hybrids to bridge valuation and risk: convertible notes, SAFEs, preferred equity with conversion features, notes with warrants, or “units” that bundle debt plus warrant coverage. These tools are often used when the issuer wants speed, staged pricing, or a defined path to a later round.
Whether the instrument is marketed as equity-like or debt-like, the disclosure and suitability standards still matter. Definition of security.
The Securities Act definition explicitly includes instruments such as any note, stock, bond, debenture, evidence of indebtedness, investment contract, profit-sharing participation, options, warrants, rights to subscribe or purchase, and more. Statutory definition.
Whether a “revenue share” is a security is often fact-specific. If purchasers are led to expect profits from the efforts of others, regulators and courts can treat it as an “investment contract” even if you avoid traditional labels. SEC v. W.J. Howey Co. (1946).
The statutory definition includes “fractional undivided interests” in oil, gas, or other mineral rights. In practice, these can appear as participation interests, royalty interests, or securitized claims on production or cashflows, depending on structure and distribution. Reference.
Private placements can include notes backed by receivables, inventory, equipment cashflows, or contractual payment streams when issued and sold as securities. This is economically different from a bank facility, but it still sits inside the private placement framework if you are selling a security to investors.
Some token offerings and related structures can be analyzed under the “investment contract” framework depending on the facts and marketing. If purchasers are led to expect profits from the efforts of others, the instrument can fall inside securities regulation regardless of the technology wrapper. Howey (1946).
Two realities matter. First, you are still selling securities, and exemptions like Regulation D have conditions. Marketing rules differ between 506(b) and 506(c). SEC Rule 506 overview.
Second, the “security” concept is based on economic reality. If something behaves like investors funding an enterprise expecting returns from your execution, it can be treated as a security as an investment contract even if it is drafted with exotic labels. Howey (1946).
If you want speed and fewer fixed obligations, equity or a SAFE can fit, but it shifts dilution and governance questions into the instrument. If you want non-dilutive capital and you can support covenants, reporting, and controls, debt can fit, but repayment discipline must be real.
If you have assets and predictable cashflows, structured notes or asset-backed formats can fit, but the documentation and control package must be tight. If you are raising for a fund or SPV, you are selling fund interests, which increases disclosure, suitability, and process complexity.
The correct choice depends on your use of proceeds, timeline, investor target, and how credible your documentation and data room are.
If you are planning a private placement and want the instrument and disclosure package to withstand institutional diligence, we can coordinate structuring, packaging, and the placement workflow. Where regulated placement activity is required, execution is coordinated through appropriately licensed partners.
Request A QuoteDisclaimer: This page is for general information only. It does not constitute legal, tax, accounting, or investment advice and it is not an offer or solicitation. Financely is not a law firm and does not provide legal advice. Financely is not a registered broker-dealer or investment adviser. Financely provides advisory and structuring support. Any securities placement, solicitation, brokerage, or other regulated activity is conducted solely by appropriately licensed third-party partners where required, under separate engagement and applicable law. No funding is guaranteed. All matters are subject to diligence, investor eligibility, KYC and AML, sanctions screening, definitive documentation, and approvals.
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