When a company wants to raise capital, it can do so by issuing shares of its stock to interested investors. A common stock sales agreement is the legal document that governs the sale and purchase of such shares. Such agreements outline the terms and conditions of the sale, including the price per share, the number of shares being sold, the time and manner of payment, and any other relevant details.

Most common stock sales agreements are structured as private placements, which means that the shares are sold directly to a select group of investors rather than through a public offering. This helps the company avoid the costly and time-consuming process of registering with the Securities and Exchange Commission (SEC), which is required for public offerings.

Before entering into a common stock sales agreement, the company and the investor will typically negotiate the terms of the investment, including the price per share and any special provisions that may be included. For example, the investor may require certain voting or registration rights, or may want to restrict the company from issuing additional shares in the future.

Once the terms have been agreed upon, the company will prepare a private placement memorandum (PPM), which provides detailed information about the company`s business operations, financials, and risks. The PPM is designed to provide the investor with a comprehensive understanding of the company and its prospects, so they can make an informed investment decision.

Once the investor has reviewed the PPM and agrees to the terms of the investment, they will sign the common stock sales agreement and provide payment for the shares. The company will then issue the shares to the investor and use the proceeds for their intended purpose, whether that be funding research and development, expanding operations, or paying off debt.

In conclusion, a common stock sales agreement is a critical legal document that governs the sale of shares in a private placement. These agreements set out the terms and conditions of the sale, and provide a framework for the company and the investor to negotiate the terms of the investment. If you are considering investing in a private placement, it is important to carefully review the common stock sales agreement and the associated private placement memorandum to ensure you understand the risks and potential rewards of the investment.