Private Placement Memorandum

October 23, 2024

by a searcher from IESE Business School in Madrid, Spain

Dear all,

I am in the process of launching my search fund in Spain and am currently working on my PPM. I have a couple of questions and would appreciate any insights:

Is the PPM template in Exhibit 3 of the Stanford Primer applicable for Spain? Is it necessary to have the company set up before completing the PPM (as the Primer refers to a "logo" and "name of your fund")? Thank you in advance, and I look forward to contributing to this community.

Best regards,

Alfonso

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Reply by a searcher
from University of North Carolina at Charlotte in Raleigh, NC, USA

I'm not in Spain but I also have had questions about when to incorporate the business. I've been told to wait until you at least have verbal commitments from an investor or two. The reason I was given is that investors don't want to pick up any possible liability from an existing business. I've also been told to do it as soon as possible so that it is done and you are ready to issue shares. Since I'm in the US and it doesn't take that long to set up a Delaware entity I haven't stressed this point much. But given ^redacted‌'s comment maybe I should go ahead and file the LLC paperwork. I'd love to hear thoughts from others.

Reply by a searcher
from University of Maryland at College Park in Annapolis, MD, USA

You can certainly draft a document but you cannot offer to sell--much less actually sell--securities in a company that has not been formed. Personally, I would not even circulate a draft document to "test the waters" for a company that has not been formed, even if deemed permissible by counsel. Investors would not take you seriously and issuers have been sued for much less.

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