What is a PPM (and how does it affect your film)?
Since my surgery I’ve been on the shelf for a while. I’m starting to come around and I have recently been consulting with FilmProposals.com - writing articles, revising some of their data, reviewing business proposals for films, etc…
Below is the first of four in my series on Private Placement Memorandum’s for feature films:
If you are looking to raise money for your independent film, you have likely heard the term Private Placement Memorandum (PPM) and are wondering if you need one? Unless you are getting private equity from family and friends, you should have a Film Private Placement Memorandum (PPM) drawn up for your fund raising. In fact, you should have a PPM even if that is the case.
What is a PPM?
PPM stands for Private Placement Memorandum. Issuing a PPM lets your company sell shares to “passive investors” (those who invest but take no active role in the production) in order to raise the money needed for the film project.
This document commonly provides investors with material information, such as a description of the company’s business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information.
How does a PPM affect your independent film?
Having a PPM is just as much for your protection as it is for your investors. The primary purpose of a PPM is to give producers the opportunity to present all potential risks to potential investors (such as the inability to find distribution or that it may never achieve financial success), thus making it difficult for investors to claim that they were not adequately warned. For this reason, it is vital the contents of the PPM be accurate and complete and meet the highest standards of full disclosure (under securities laws) to potential investors.
In drawing up a PPM, be aware of the type of film you are making. This honesty will protect you later on. Do not oversell your film. If you are making a low budget independent film that will more than likely be taken to a sales market or film festival, your PPM should not focus on theatrical releases (their numbers and risk factors). When using comparable films or revenue projections be as conservative as possible. For example, your found footage film should not reference Blair Witch Project and/or Paranormal Activity. Also, don’t use sequels or franchises when putting numbers together because they will obviously skew your numbers.
Where can I get a PPM done?
Most of us don’t have access to investment banks, so entertainment law firms are a good place to start. These are in the $10,000 range, but could run you as much as $20,000. This could very well be an astronomical number, and would defeat the purpose of trying to raise this money. Don’t despair, there are firms that specialize in PPM’s online for a fraction of the price. However, before doing business with them, make sure that they have adequate experience in films.
The PPM does not have to be written by an attorney, but must be reviewed by a qualified attorney to assure it complies with all national and state regulations.
Stay tuned for the next article in our 4 Part Series: What Goes Into a PPM?
Filed under: Filmmaking, Movies
