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PIPE

See: Private Investment in Public Equity

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PIPE

See private investment in public equities.

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Private Investment In Public Equities

The practice of a private investment company such as a mutual fund making a large investment in a publicly-traded company. This practice is similar to venture capital; the primary difference comes from the fact that PIPE is done for a company that is already publicly traded. PIPE is advantageous for the company because it is simpler and involves fewer regulatory hurdles than a new issue of securities; it can be advantageous for the investor because it usually receives shares in the company at a deep discount to their market value.

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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.