Private equity, or PE, is capital that is not traded nor listed on stock exchanges. It is often contrasted with public equity. Both public and private companies can issue private equity using their attorneys who will draft a private placement memorandum (PPM), or a document that presents information concerning how a business operates and its offering terms. The document further details the potential risks associated with a specific private investment. This is an affordable way for companies to gain investors.
Further, unlike public equity, private equity (most of the time) involves a small number of accredited investors that invest larger amounts of money, such as wealthy individual, angel or institutional investors. This increases your risk, since each investor holds more stock in the company. However, investors who participate in private equity are more experienced than the average investor. Thus, you will have a better chance to increase net a positive return on investment (ROI). In general, private equity investors aim for long-term profit, often depending on the company to develop before selling their stock.