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PIPEs

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PIPEs

A Guide to Private Investments in Public Equity

Bloomberg Press,

15 min read
10 take-aways
Audio & text

What's inside?

Do you want to smoke PIPEs — Private Investment in Public Equity — or are the risks to your fiscal health too high?

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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

This is an excellent and comprehensive introduction to PIPEs. The acronym stands for Private Investment in Public Equity, and this includes not only common stock but warrants and other permutations of equity. Companies often issue PIPEs when they need capital but when market conditions make it imprudent to raise funds through a public offering. Most PIPEs investors are sophisticated institutions, and hedge funds are probably the most active participants in the market. PIPEs are a high-risk investment with abundant legal, market, regulatory and other complexities. This book neither attempts to sell PIPEs nor to discourage people from buying them. While somewhat repetitive, it is reasonably objective and reasonably thorough. getAbstract.com strongly recommends it to professional investors.

Summary

PIPE Basics

The acronym "PIPE" stands for Private Investment in Public Equity. Each word matters:

  • Private - PIPEs are negotiated transactions between a public company and either one private investor or a few private investors. SEC regulations permit PIPEs through certain, clearly defined regulatory exemptions.
  • Investment - PIPEs are direct investments; investors buy directly from the company, which issues the equity and becomes, therefore, the "issuer."
  • Public - The issuers are publicly owned companies.
  • Equity - PIPEs are investments in stock, convertible bonds, warrants or other equity.

PIPEs began to gain wide acceptance approximately two decades ago, when microcap companies used them to get financing from hedge funds and affluent individual investors. In 1990, SEC Regulation S (Reg S) expanded the market by allowing public companies to sell unregistered securities to foreign (non-U.S.) buyers. Most of these securities were debt-like, that is, convertible preferred stock or convertible debt. Most of the deals were between one and five million dollars. The market was relatively small. In the late 1990’s, biotechnology companies...

About the Authors

Steven Dresner is president of DealFlow Media, Inc., and publisher of the PIPEs Report. He was formerly vice president of the Investment Banking group at Ladenburg Thalmann & Co. E. Kurt Kimis founder, president and chief executive officer of PrivateRaise, L.L.C., a research firm specializing in information about private placements and Rule 144A transactions.

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