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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. Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content. |
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