Private placement is a variation of the IPO in which there is a direct sale of an issue of securities to a large institutional investor. When a private placement is initiated, there is no public offering, and no prospectus is prepared.
A private placement is the sale of a security to a small set of a qualified institutional buyers. The investors are traditionally insurance companies and investment companies. Since the securities are not registered for sale to the public, investors have typically followed a “buy and hold” policy.