From Wikipedia, the free encyclopedia

A private investment in public equity, often called a PIPE deal, involves the selling of publicly traded shares to private investors, rather than to the public through an offering registered with the Securities and Exchange Commission. PIPE transactions are typically undertaken by smaller public companies. Shares are sold at a slight discount to the public market price, and the Company typically agrees to use its best efforts to register the resale of those same securities for the benefit of the purchaser. The benefit to these transactions for smaller issuers is that they provide quick access to capital at a reasonable transaction cost. Some investors find these attractive because they get shares at a discount to the public market price, and because it provides an opportunity to acquire a sizeable position without having to chase a rising stock price caused by their own purchases.

The use of PIPE deals in the U.S. peaked in 2000, with 1,106 such deals raising $24.3 billion, according to PlacementTracker. Their use has been rising again: in 2005, there were 1,301 PIPE deals in the U.S. raising a total of $20 billion. In recent years, top Wall Street firms such as Lehman Brothers and Citigroup have gotten involved in the PIPE market as bankers/placement agents.

A PIPE can be done in some countries, such as the US, but is illegal in other countries where it must be preceded by a rights issue.

Depending upon the terms of the transaction, a PIPE may dilute existing shareholders' equity, particularly if the seller has agreed to provide the investors with protection against market price declines, which can lead to issuance of considerably more shares to the investors for no more money.

• Structured PIPE Transactions Take Hold as Convertibles Deemed Risky
• George L. Majoros, Jr., The Development of "PIPEs" in Today's Private Equity Market, 51 Case W. Res. 493 (2001)
• Leib M. Lerner, Disclosing Toxic PIPEs: Why the SEC Can and Should Expand the Reporting Requirements Surrounding Private Investments in Public Equities, 58 Bus. Law. 655 (2003)
• Secrets in the Pipeline, Gretchen Morgenson and Jenny Anderson. New York Times, August 13, 2006.
• Steven Dresner & E. Kurt Kim, "PIPEs: A Guide to Private Investments in Public Equity", Bloomberg Press (2003)
• Steven Dresner & E. Kurt Kim, "PIPEs: A Guide to Private Investments in Public Equity- Revised and Updated Edition", Bloomberg Press (2006)
• The PIPEs Report News, Information and Analysis of Private Investments in Public Equity.
• The PIPEs Directory This up-to-date resource includes an analysis of the state of the market and complete contact information and profiles of active participants in PIPE transactions.
• PlacementTracker. The leading source of data, research, and analytic tools for the active participants in the PIPE market.
• PrivateRaise.com PrivateRaise.com® is the leading source for comprehensive market intelligence and analysis pertaining to private placements of equity and equity-linked securities executed by public corporations.