A pre-Initial Public Offering (IPO) placement can be defined as a private sale shares in large quantities before the shares are listed on a stock market exchange.
The purchasers are generally private, hedge funds, and other investing foundations ready to purchase large stakes in the company.
Because of the magnitude of the investments being made and the dangers in question, the purchasers in a pre-Initial Public Offering placement typically recieve a discounted price in comparison to the price expressed in the prospective for the Initial Public Offering.
From the perspective of a new organization, a pre-IPO placement is an approach to raise funds before going public.
It likewise is an approach to balance the risk that the Initial Public Offering price will end up being optimistic and the price is not going to rise immediately after it opens.
From the purchaser's perspective, the amount per share might be discounted from the normal Initial Public Offering price but there is no genuine assurance of the price per share that the market will be ready to pay.
Truth be told, the purchase is usually done without a prospectus and with no genuine assurance that the public listing is going to happen.
The discounted price acts as an compensation for this possible vulnerability.
Very few individual investors participate in pre-IPO placements.