Private Investment in Public Equity

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Private Investment in Public Equity (PIPE)

Occurs when private investors take a sizable investment in publicly traded corporations. This usually occurs when equity valuations have fallen and the company is looking for new sources of capital. This is a means by which a public company gets additional access to the equity markets in express mode-- they already have public shares trading and this is an additional offering to investors under a securities purchase agreement, the issuer promises to register the shares typically via a resale registration statement within so many days after the closing.

Private Investment in Public Equity

The form of equity financing in which a private investment company purchases a certain amount of stock in a publicly-traded company at a discount from its market value. Publicly-traded companies commit to PIPE in order to raise equity without going through expense and regulatory issues involved in making a secondary offering. This form of financing is popular especially with small and medium-sized publicly-traded companies, as they often lack the resources to raise capital using other methods.

There are two types of PIPE. A traditional PIPE allows the private investment company to simply buy stock in the publicly-traded company. This is a direct form of equity financing. A structured PIPE, however, involves the publicly-traded company issuing a certain amount of convertible debt. This carries less risk for the private investment company and does not dilute the publicly-traded company's shares outstanding, at least not immediately. See also: Venture capital.
References in periodicals archive ?
The agent takes a leading role in initiating, progressing, and closing the PIPE deal.
It is also ironical that the US has made India its strategic partner by signing the nuclear deal while it denies the same cooperation to energy-starved Pakistan and also piles pressure on Islamabad to cancel its gas pipe deal with Iran.
As a matter of fact, we have signed in November 2008 -- at the peak of the financial crisis -- a multi-million USD line pipe deal for a BP/Sonangol project.
Elias (2001) delineates the chronology of events surrounding a toxic PIPE deal as follows:
The alternative PIPE deal is called a "technical deal," where investors invest based not upon "actuals" but on future prospects, and thus prefer equity ownership down the road, at liquidation, when the firm's fundamentals are likely to be stronger.
As significant shareholders with our own fiduciary duties to investors to uphold, we cannot stand by silently if such reports are accurate and Yahoo, a company in no need of cash, plans to engage in a sweetheart PIPE deal which will serve only to entrench Mr.
The firm's PIPE deal volume ranking improved from seventh place among investment banking placement agents in 2007.
5 million, via a PIPE deal, to acquire an operating business and enter into a business combination with GOIH.
He was also one of the youngest licensed brokers at an international investment bank headquartered in the UK, learning the dynamics of the equities markets in addition to structuring private equity and PIPE deals.
Dolan calls them an extra dart and it will be interesting to see how the unassuming and hugely likeable Pipe deals with the hostile locals.
This spate of PIPE deals involving financial institutions has resulted from systemic factors, such as the unprecedented funding requirements of large financial institutions and a scarcity of other sources of capital, as well as from the increasing private equity interest in financial-sector investment opportunities.