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the Basics of Private Placements - YouTube
Channel: Outsider Club
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Hey it's Nick Hodge, your "Nick's Notebook" editor.
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There are some questions that have been coming in
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repeatedly from various members so I
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know more than one of you
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have these questions. I thought I'd just
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take a couple of minutes today and
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respond to the questions that I received
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most frequently and also provide a
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little bit more guidance to those of you
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who may be new to the world of private
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placements. I know it can seem a little
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bit daunting at first with the amount of
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paperwork and necessary signatures and
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things of that nature so I want to just
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make it as easy as possible and guide
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you through the process as well as I can.
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If you have additional concerns or
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questions you're welcome to write into
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Outsider Club customer service
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anytime
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reply to any email you get from Nick's
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Notebook with a question or just use the
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contact form on the Nick's Notebook
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website. So i hope the following
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questions and the answers I provide give
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you a little bit more insight and
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overview into the world of private
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placements.
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A private placement is just like
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it sounds like. When a company needs to raise
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money they can do it in the private
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market as opposed to the public market.
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So they can do it faster and so they can
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avoid fees if they raise money privately
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like we do through Nick's Notebook they
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can avoid having to register the
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Securities and they can also avoid
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having to file a prospectus, and so they
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can get the capital from investors hands,
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from our hands, into their coffers into
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the company at a much faster pace than
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they would if it were to be raised
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publicly.
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In a private placement, like
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and through Nick's Notebook, you fund a
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company directly so they issue the
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securities to you. In that case, they
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become the issuer. So you're buying the
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securities, or you're buying the shares
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directly from the company itself. When
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this happens, when you get an alert from
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Nick's Notebook you'll typically contact
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someone at the company in a managerial
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or in a director position, and they'll
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get you the necessary paperwork that's
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typically called "subscription documents."
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It will tell you what company you're
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investing in, and what the terms of the
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deal are. At what price the shares are
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being issued, if there is a warrant, and
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what the terms of that warrant are, If
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there is one.
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So, the documentation is just a
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subscription document you'll get from
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the company that I put you in contact
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with on a case-by-case basis.
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Private placements can be lucrative
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because in
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many cases we the investors are taking on
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more risk and so there needs to be
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incentives for us to provide the company
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with capital. In some cases that can be a
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discount to market, where your issued
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shares at a discounted price to what
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their trading publicly, or in other cases
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it can be a warrant to sweeten the pot.
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So you either get a half warrant or a
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full warrant that allows you to buy more
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shares at a future date at a specified
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price.
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In most cases you'll need to be an
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accredited investor to participate in
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these deals and there's various ways you
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can meet the requirements to become an
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accredited investor. The two most common
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are net worth, in which you have a net
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worth not including your house of 1
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million dollars, or if you're an
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individual, if you make two hundred
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thousand dollars in income annually, or
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if you're married, 300,000 dollars in
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income annually.
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There are many other exemptions for
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which you can become a accredited investor
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so make sure you ask your broker or you
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check with the IRS or other governing
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body's website to make sure your
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accredited.
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Often times
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there is no minimum to
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invest in the deals that I give you as a
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member of Nick's Notebook, but you want
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to make sure of a couple of things. You
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want to make sure, one, that it's worth
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your time and money, and two, that it's worth
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the company's time and money. Remember
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this is sometimes not a cheap
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process for you or the company. You'll need
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to be wiring funds, you'll need to fill out
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subscription documents that are
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sometimes 30 or 40 pages in length and
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then you'll have to parlay with the
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broker, who in turn will have to parlay
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with the transfer agent, and so you
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really want to make sure that the
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amount of capital involved is worth
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everybody's time including your own, and
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that's a different number for everybody
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but typically i would say you don't want
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to invest in these private placements
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with less than five thousand dollars. If
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that's the amount of capital you or
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you're looking to invest that's fine, but
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you should be buying I think that amount
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in the open market as opposed to, you
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know, trying to invest in a private
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placement with that amount of capital
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and involving all these other offices
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and people.
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You absolutely need a full-service
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broker to participate in these deals. I
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recommend one on the Nick's Notebook site,
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under the "Getting Started" section of the
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website. So you can see that
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recommendation there but there's a whole
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litany of brokers in the U.S. and Canada
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that handle private placements. It's
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really tough to do these on your own
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because there's so many moving parts
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involved. Once you wire the funds or have
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your broker wire the funds, you also
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need to complete the subscription
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documents, and then the issuer or the
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company that you're investing in will
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get a copy of those documents and so
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will the transfer agent and this
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gets to involve things about removing
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the legend off of your shares so they
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can become free trading after the the
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four-month whole period, and it's just
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way too complex for an individual to do
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on their own and in fact it may be near
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impossible. So you want to really make
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sure you have a high-quality,
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full-service broker who can take care of
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all these steps for you. Really, all you
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want to be doing when I recommend a
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placement and Nicks Notebook is filling
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out, its signing the
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subscription documents, telling the
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issuer how many shares you want and at
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what price, and then wiring them the
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funds. Other than that your broker should
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be taken care of everything for you.
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You know, it's not hard to find
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private placements. The company has to
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file with the Securities Exchange where
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they're going to be raising money. So you
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can sift through filings and know on a
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daily basis when a new private placement
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becomes open. The thing that you really
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need to look out for in the service that
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Nick's Notebook provides is a bit of vetting.
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So I know in some cases that executives
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behind these deals. Either I've invested
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in other companies that they've done or
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I know of other companies that they've been
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behind that have been successful in the
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past, or I talk to people about the
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assets were investing in, if it's a
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metal asset or mining asset, I'll talk to a
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geologist or I'll talk to you know
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another high-net-worth investor who has
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invested in similar deals or deals with
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the same people. So really I vet the
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pedigree and it's just my network that
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has afforded me the chance to
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invest in these private placements, the
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network that I built over the past
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decade in this industry, and so I see
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deals like this all the time and you may
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as well but the the secret sauce, if you
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will, is sort of figuring out which deals
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are going to be better than other
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deals and that's sort of the service
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I provide to you.
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You know, when to sell is always the
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million-dollar question. Everybody has
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their own parameters the easiest answer
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I can give you is when you're satisfied
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with your gain then you can take profits.
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But i will be providing more hard
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guidance than that and really it has to
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do with time. So Nick's Notebook has only
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been around for a year. None of the
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investments that we've funded so
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far have been trading for a year and as
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they come up on that 365 day mark
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we'll start to re-evaluate and see in
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which positions we can sort of take some
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profits on the table to fund our next
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round of investments, because we can't
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just keep funding investments in
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perpetuity, right? We need to take some
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profits on the table to be able to fund
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new opportunities. So as the service ages
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a little bit as we hit just over a full
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year in existence i start to provide
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more hard guidance like that in the
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issues that I send directly to your
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inbox but at the end of the day if
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you're happy with your gain,
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especially if you have warrants that you
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can hold while you exercise your shares,
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by all means take the game off the table
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and hold the warrants for additional
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upside.
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