Private equity investments are a form of owning a piece of a company. Equity investments are riskier than debt investments in that the owners in a company are always the last to get paid out in case of liquidation. However, equity investment has a much higher upside; the potential for the value of the investment itself to increase. Equity investments can range from owning half, or in some cases most of a small business (such as a store or manufacturing business) to owning just a fraction of a much larger corporation. In the case of larger corporations that are preparing for public offerings, the pre-initial public offering (Pre-IPO) equity investment may take the form of a ‘private placement’. Private placements are often preferred by sophisticated investors because they have an exit strategy and often buy into the company at a portion of what they would pay after the company goes public. This provides them with a higher return on investment than if they were to wait.
Investing in small companies is not for everyone. Though it can be quite lucrative, it also comes with some risks and challenges. Yet, great wealth has been built under the public radar through investments in smaller (and sometimes larger) private companies or are looking for private equity investment opportunities.
If you would like to learn more about private placement investing, contact us at email@example.com with subject line ‘private equity investments’.