Definition of ‘Pre-IPO Placement’
When a portion of an initial public offering (IPO) is placed with private investors right before the IPO is scheduled to hit the market. Typically, these private investors in a pre-IPO placement are large private equity or hedge funds that are willing to buy a large stake in the company. The size of the investment means the price paid for shares in a pre-IPO placement is usually less than the prospective IPO price.
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It may seem like these private equity and hedge funds would be able to turn around and sell the shares at a higher price right away, but generally there is a lock-in period attached to the placement. This lock-in period prevents the funds from selling the shares in the short-term and tends to help attract investors who are looking to invest in the company for the long-term.
