Prior to an IPO, a company can offer its shares only to investors deemed to be “sophisticated” under the law and therefore able to handle their own due diligence. These are known as private placements. By process of elimination it is apparent that public stock exchanges serve “unsophisticated investors.” That means most of us. The law imposes fairly stringent reporting requirements on companies which list their shares on public exchanges. And the exchanges themselves, which are considered “self-regulating,” impose their own listing requirements on the firms.