Private placement offerings have a traditional and legal downside.

Liquidity isn’t normally a hallmark of private placement offerings being made to accredited, sophisticated, and qualified investors for a couple of key reasons, or at least for reasons explained by S.E.C. rules and regulations, or rules of the public path, or road. A ‘federal exemption is provided from registration’ for ‘private placement offerings’; because public investment offerings are characteristically expensive and involve extensive oversight by the regulators and their reporting, and auditing requirements, and mostly because a special exempt category for ‘accredited investors’ has been created to allow investment in private deals without undue public filing requirements, etc. Filing a public offering or going through the process is typically cost prohibitive for new start-ups, or small investment groups & clubs; so the flip-side, or counter balancing argument, or view, is the Feds won’t review, pass judgment on, or perform the customary considerable oversight with public offerings, or institutions such as banks, insurance companies, or other legal entities who historically have had oversight responsibility, and are licensed and deemed accountable by way of their experience, and professional credentials to protect their investors.

So, you don’t get liquidity when you invest in private placement offerings, like you do when investing in the public marketplace, or get the advantage of secondary markets, and market makers, who can sell your public stock, and provide you with the liquidity you get when you invest in the stock markets. The Feds leave you alone if you file Form D’s in each state where you offer private placements, but they do require U-2 filings for manager, and control persons, or sponsors & issuers of exempt securities who cannot collect commissions under threat of very real perjury laws. Therefore, there is adequate oversight by both the Federal and State authorities, and it isn’t unreasonably withheld if you follow rules when forming your private placement offering memorandums, and you provide ‘full disclosure’ of all pertinent facts and history about the deal being offered, and about you as the manager. The only way to do this properly is by hiring a securities attorney who has insurance, and is willing to take the risk associated with preparing the private placement memorandums which are used and required to do business with private investors.

Bottom line, you’re on your own if you are an accredited investor…however this is exactly why & where some good opportunities with excellent upside can be found. If you can find a private placement offering where the manager has experience with selling in auctions, to private buyers, boutiques, pension funds, or other private, and production buyers in the oil & gas industry you can achieve some liquidity with your oil & gas depleting, and declining assets. Remember, Oil & Gas investments are quite different than real estate in one crucial way, real estate is nailed down, or tethered, whereas oil & gas must be sold to take profits, and when the amount of oil production declines, you must either sell your assets, and/or drill more wells to sustain production at levels desired, or possible levels of production in a given leasehold interest or oil field.

Rewards are directly related to taking Risk…or “No guts, no glory!”

More later…Dennis