Public vs private issues

Companies can borrow money either through the public debt market or through private placements.

A “public” bond issue is approved by a securities agency that ensures disclosure of information through a legal document called a “prospectus” or “information circular”. In broad terms, a public placement involves issuing securities to the broader investing public through a registered offering requiring ongoing reporting obligations.

It’s important to note that disclosure does not mean investment suitability. A highly-speculative bond issue is allowed, as long as the speculative nature is adequately disclosed. Investors looking at such an issue should make sure to read every detail, and consider, “can I afford to hold onto this investment even in a worst case scenario?”

A “private placement” is something directly negotiated between the issuer and a lender or group of lenders and is restricted in trading under securities law. This means that only “sophisticated investors” may purchase or trade in these securities, often resulting in lower costs and faster execution but reduced liquidity for investors.

This usually means there is some minimum investment restriction. In Ontario, for example, a minimum purchase amount of $150,000 is required.

While both public and private placements allow companies to raise capital, the key difference lies in who can participate and the level of regulatory disclosure required.

Why would a company choose public vs private?

Public	Private
Good for those seeking broader access to capital markets Long-term liquidity for investors Increases transparency Enhances credibility Allows securities to trade freely in the secondary market – enter and exit easily Higher compliance costs Ongoing disclosure obligations	Speed Confidentiality Flexibility Can be completed quicker Involve fewer regulatory filings Require less extensive disclosure requirements Sophisticated investors Resale restrictions and longer holding periods – riskier

The growing role of private markets

In recent years, private markets have grown significantly compared to the public. Many companies now remain private for longer periods, raising capital through multiple private placements before pursuing an IPO. Institutional investors such as pension funds and private equity firms have increased allocations to private assets, contributing to the expansion of private market financing.

Quick comparison

Feature	Public	Private
Investors	General public	Accredited/institutional investors
Disclosure	Full prospectus	Exempt from full registration
Liquidity	Freely tradeable	Often restricted
Cost	Higher	Lower
Speed	Slower	Faster