If you’ve followed money news at all this year, you’ve seen the stories: Femi Otedola pledging $100 million to buy into the Dangote Refinery before it lists on any stock exchange, and Davido posting (then quickly deleting) a form suggesting he wanted in too. Which raises an obvious question: how are people buying shares in a company that isn’t even publicly traded yet?

The answer is a deal type called a private placement — the wealthy investor’s route into a company before the public gets a chance. It sounds exclusive because it is. But the idea behind it is surprisingly simple, and understanding it will make you a sharper investor.

A private placement is when a company raises money by selling securities (such as shares or bonds) directly to a small, handpicked group of large, pre-approved investors rather than to the general public on a stock exchange. Companies use it to raise capital quickly and privately, often just before an initial public offering (IPO).

In this article, you’ll learn how private placements work, how they differ from public offerings and IPOs, who can invest in them, the risks involved, and how to gain exposure to similar opportunities — even without a $1.3 billion net worth.

What is a private placement?

In a private placement, instead of selling shares or bonds to the public on the Nigerian Exchange (NGX), a company quietly sells them to a select few—specific, prearranged buyers it approaches directly.

There’s no advert, no open offer, no ticker (like SPCX or MTNN). Instead, the company (private or public) draws up a shortlist of buyers it already knows: banks, pension funds, asset managers or a few wealthy individuals. Terms are then negotiated behind closed doors, and the public is never invited.

The securities themselves can be equity (an ownership stake in the company through shares) or debt (a loan to the company through bonds or notes, repaid with interest). In Nigeria, privately placed debt is the more common choice for raising capital: corporate debt notes and commercial paper change hands this way, far from public view.

How does a private placement actually work?

Think of a private placement as a members-only pre-sale — like a real estate developer quietly selling choice flats before the estate hits the open market.

It runs in five steps:

Step 1: Set the target

The company and its advisers (an issuing house or investment bank) set the amount to raise and decide whether to do it through shares or debt.

Step 2: Hand-pick the investors

Public advertising is banned, so the issuing house works its network: pension fund administrators (PFAs), insurers, asset managers and high-net-worth individuals (like Otedola and Davido) — “smart money” that brings strategy, not just cash.

Step 3: Share the PPM

Shortlisted investors receive a private placement memorandum (PPM), a confidential document that covers the business, its financials, the terms, the use of proceeds, and the risks of investing.

Public fundraises have their own version of this document, and it’s one the company must publish for everyone to read. That public version is called a prospectus; the PPM is its private cousin.

Step 4: Negotiate and dig in

After due diligence, investors negotiate the deal: the price they’ll pay, how long they must hold their securities before reselling (the lock-up period), protection from their stake shrinking if the company issues new shares later (dilution) and sometimes board seats.

In large deals, invited investors may even bid against one another, auction-style, to set the final price — a process called a book build.

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Step 5: Subscribe and allot

Investors who want in formally commit to buying — a step called subscription. Once the funds are transferred, the company allocates the securities to each investor (known as allotment) and reports the outcome to the SEC. Buyers also typically agree to a lock-up: a fixed period during which they can’t resell what they’ve just bought.

The whole process, from first phone call to final allotment, can wrap up in a matter of weeks. That speed is a big part of the appeal.

Private placement vs public offer vs IPO

Private placements, public offers and IPOs get mixed up constantly in everyday conversations, and it’s understandable — they all raise money by selling securities. The cleanest way to separate them is to ask two questions: who is allowed to buy, and how much must the company disclose?

Here’s how you can understand the difference between all three:

Feature	Private placement	IPO	Public offer
Who can buy?	Select qualified and institutional investors	The general public — first time	The general public
SEC approval	Yes (only for public companies)	Yes	Yes
Offer document	Confidential private placement memorandum(PPM)	Full public prospectus	Full public prospectus
Listed on the NGX?	No	Yes — the first listing	Sometimes
Speed	Days to weeks	Months or longer	Months
Cost to issuer	Lowest	Highest	Higher
Pricing	Negotiated or by auction (book build)	Fixed price or book build	Fixed price or book build
Liquidity for you	Very low; lock-ups are common	High once trading opens	High if the shares are listed

The main thing to remember is that a private placement is not an IPO, and it’s not a public offer (which includes an offer for sale of existing shares). It usually comes earlier in a company’s life — they essentially raise quietly first, then list publicly later.

That’s the sequence playing out with the Dangote Refinery: first the private placement, then a planned IPO.

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Why do companies (and big investors) use private placements?

If public markets offer more money and prestige, why go quiet? The answer is simply that each side of the deal gets something it values.

For the company, the appeal of private placements comes down to five things:

1. Speed. Weeks, not the year-plus an IPO can demand.
2. Lower cost. No heavy underwriting or public marketing bills.
3. Confidentiality. Sensitive numbers are shared with a few vetted investors, not competitors.
4. Flexibility. Price, tenor and rights are negotiated, not standardised.
5. Pre-IPO staging. An early raise anchors the valuation and tests investor appetite before listing.

For the big investor, early access is the prize: you get a negotiated price (often below what the public later pays), which means more potential return on investment (ROI), plus a say in the terms and sometimes a seat on the board.

Institutions also use placements to add diversification beyond listed stocks. The upside is real, but so are the trade-offs; more on those shortly. First, let’s go over a few recent private placements.

Some recent private placements

Private placements are easier to understand with real examples.

Here are four completed deals (covering both shares and bonds, in Nigeria and abroad):

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Deal	What happened	What it teaches
Facebook–Goldman Sachs (2011)	Goldman invested $450 million at a $50 billion valuation, then pooled about $1.5 billion from wealthy clients through a special purpose vehicle (SPV).The SPV counted as a single shareholder, which kept Facebook under the US 500-shareholder disclosure limit. Each client needed at least $2 million, locked in until 2013.	The textbook pre-IPO placement — Facebook listed in May 2012.
MTN Nigeria (2019)	Before listing on the NGX in May 2019, MTN placed “linked units” with selected Nigerian investors through a nominee, Stanbic IBTC Asset Management.	Companies can build a local investor base privately before the public ever gets a look.
Fidelity Bank (2025)	Raised a reported ₦259 billion in an equity placement that opened and closed in a single day (December 31, 2025), with Afreximbank among the investors.The raise helped the bank meet the Central Bank of Nigeria’s recapitalisation target.	With a few pre-agreed buyers, a placement can move faster than any public offer.
Dangote Fertiliser (2026)	Sold a $750 million five-year Eurobond at 7.75% directly to international institutions, in a deal arranged by J.P. Morgan and BofA Securities.	Debt deals happen privately too — this one was priced below Nigeria’s own 8.63% borrowing cost.

All four deals follow the same pattern: a handful of pre-selected investors, negotiated terms and no public invitation. The exclusivity is the point — and it’s written into the rules.

Who can invest in private placements?

Most everyday investors can’t invest in private placements — at least not directly. Nigerian law reserves private placements for “qualified investors,” and the bar is set deliberately high.

The SEC recognises two groups:

1. The first is institutional investors: banks, PFAs, insurers, fund managers and registered private equity and venture capital firms.
2. The second is high-net-worth individuals — anyone with a net worth of at least ₦300 million, excluding their home, car and furniture.

The same thinking applies in other markets.

In the US, for example, an “accredited investor” needs a net worth of $1 million or more, excluding their home, or an annual income of $200,000 or more ($300,000 with a spouse). The assumption everywhere is the same: investors at this level can vet deals (and absorb losses) without the protections afforded by public markets.

And even for investors who qualify, the entry cheques are enormous. The Dangote Refinery placement required a minimum of 1 million shares at $0.35 each — a $350,000 commitment, roughly ₦480 million. That single number explains why you’ve likely never been offered one.

Are private placements risky?

Private placements are risky — even for the big players. The risks are different from those of listed shares, and there are fewer safety nets.

Here are some risks that come with private placements:

• Illiquidity. Your money is locked. The Dangote placement’s shares, for instance, can’t be resold for 365 days after allotment — and even then, there may be no ready market to sell into.
• Thin disclosure. A private company reveals far less than a listed one. An investor’s main protection is the PPM (a document written by the issuer itself), so the real due diligence falls on the buyer.
• Untested pricing. The price is set by negotiation, not by daily market trading, so early investors can overpay. And because the minimum investments are so large, a single deal can dominate even a wealthy portfolio — adding concentration risk to all the usual ones.

The rules that lock most people out exist partly to protect them. So if anyone ever promises you a guaranteed allocation in an “exclusive” deal, treat it as a red flag, not an opportunity.

The bottom line

A private placement is how a company quietly raises money from a small, handpicked group of large investors — usually before an IPO. It’s fast and flexible for the company, rewarding for the chosen few and closed to almost everyone else. The good news? You don’t need to be a high-net-worth individual to build wealth.

Start small, stay consistent, and let regulated, pooled options do the heavy lifting by downloading Piggyvest to get started. And when the next big IPO dominates the headlines, you’ll already know what happened before it.