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PIPEs: A Guide to Private Investments in Public Equity
Private investments in public equity (PIPEs) offer a practical financing alternative for companies seeking capital and a unique asset for investors. For practitioners who know how to identify and execute transactions, PIPEs present a growing opportunity.
This revised and updated guide presents the views, voices, and invaluable expertise of leading practitioners from all specialties in the field. The book is divided into three parts: "The Business of PIPEs," which provides a historical backdrop and overview; "Regulatory Landscape and Structural Alternatives," which details the legal framework and transaction structures; and "Deal Flow," which offers the investor's perspective on negotiating deals.
With detailed discussions, ranging from the origins of the marketplace and deal structures to legal considerations and due diligence, and from finding new opportunities to trading strategies, this book provides a clear window to the inner workings of this active area of the small-cap market. Investors, financial analysts, investment bankers, corporate and securities attorneys, and executives of public companies will find substantial value in the pages of this book.
This revised and updated guide presents the views, voices, and invaluable expertise of leading practitioners from all specialties in the field. The book is divided into three parts: "The Business of PIPEs," which provides a historical backdrop and overview; "Regulatory Landscape and Structural Alternatives," which details the legal framework and transaction structures; and "Deal Flow," which offers the investor's perspective on negotiating deals.
With detailed discussions, ranging from the origins of the marketplace and deal structures to legal considerations and due diligence, and from finding new opportunities to trading strategies, this book provides a clear window to the inner workings of this active area of the small-cap market. Investors, financial analysts, investment bankers, corporate and securities attorneys, and executives of public companies will find substantial value in the pages of this book.
320 pages, Hardcover
First published October 1, 2003
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February 9, 2024
Most of this information was taken from the book PIPEs: Private Investments in Public Equity. Some of the information I put into this article was found from other sources, but about 80% is taken directly from this book. I'm going to start by going over most of the key terms, regulations, laws, and definitions that are used in the book. Later I'll try to put some of this in context of how it effects traders.
I'll also reference other sources besides the book along the way.
What is a PIPE Deal?
PIPEs (private investments in public equity) allow public companies to quickly raise capital by selling shares directly to institutional investors at a negotiated price. This avoids the lengthy and expensive process of a secondary public offering.
In a PIPE deal, the company appoints an investment bank to help find accredited investors and negotiate terms. The investors commit capital in exchange for shares, or convertible securities, at a discount to the market price. This benefits both the company seeking funds and the investors seeking undervalued shares.
While PIPE deals close faster than public offerings, they are still regulated by the SEC. Companies must file registration statements for the new shares within a set number of days after closing. Investors also face blackout periods restricting when they can sell shares and the shares must be declared Effective by the SEC.
introduction to PIPE transactions
Basic Definitions & Terminology
PIPE
A PIPE is a privately negotiated investment in a public company.
Qualified Institutional Buyers
QIBs, or qualified institutional buyers, are key investors in larger PIPE transactions. QIBs are large institutional investors that meet certain SEC criteria, including having at least $100 million in investable assets.
Accredited Investors
An individual or institution deemed capable of understanding the financial risks of purchasing restricted securities. It's a standard meant to protect less sophisticated investors.
For individuals, accredited investors must have either:
Annual income of $200,000 individually or $300,000 jointly with spouse for the last 2 years and expected this year.
Net worth over $1 million individually or jointly with spouse, excluding primary residence.
Other Ways to Qualify
Entities like banks, business development companies, 501(c)(3) organizations with over $5 million in assets
Directors, executives, general partners of the issuing company
Underwriters
Underwriters serve as principals by purchasing securities from the issuer and reselling to the investors, which is not the standard structure of a PIPE deal. PIPEs involve direct private placements and negotiation of the purchase agreement between the issuer and investors without an underwriting agreement. Overall, underwriters are generally not involved in PIPE deals, which predominantly use Placement Agents rather than underwriters to find investors.
Placement Agents
Issuing companies select the investment bank that will serve as the company's Placement Agent. Placement agents play a leading advisory role in PIPE transactions by identifying and soliciting potential investors, conducting due diligence, structuring deal terms, facilitating negotiations between the issuer and investors, arranging investor meetings, and closing the deal. They serve as an intermediary between the issuer and investors during the transaction.
Some of the most common placement agents I've been seeing in recent PIPE deals have been HC. Wainwright, Roth Capital, Maxim Group, Aegis Capital, Oppenheimer & Co., and Cantor Fitzgerald.
Shelf Registration
A shelf registration allows a company to register securities...
CONTINUE READING MY BOOK SUMMARY & REVIEW HERE: https://kriminiltrading.com/blogs/mus...
I'll also reference other sources besides the book along the way.
What is a PIPE Deal?
PIPEs (private investments in public equity) allow public companies to quickly raise capital by selling shares directly to institutional investors at a negotiated price. This avoids the lengthy and expensive process of a secondary public offering.
In a PIPE deal, the company appoints an investment bank to help find accredited investors and negotiate terms. The investors commit capital in exchange for shares, or convertible securities, at a discount to the market price. This benefits both the company seeking funds and the investors seeking undervalued shares.
While PIPE deals close faster than public offerings, they are still regulated by the SEC. Companies must file registration statements for the new shares within a set number of days after closing. Investors also face blackout periods restricting when they can sell shares and the shares must be declared Effective by the SEC.
introduction to PIPE transactions
Basic Definitions & Terminology
PIPE
A PIPE is a privately negotiated investment in a public company.
Qualified Institutional Buyers
QIBs, or qualified institutional buyers, are key investors in larger PIPE transactions. QIBs are large institutional investors that meet certain SEC criteria, including having at least $100 million in investable assets.
Accredited Investors
An individual or institution deemed capable of understanding the financial risks of purchasing restricted securities. It's a standard meant to protect less sophisticated investors.
For individuals, accredited investors must have either:
Annual income of $200,000 individually or $300,000 jointly with spouse for the last 2 years and expected this year.
Net worth over $1 million individually or jointly with spouse, excluding primary residence.
Other Ways to Qualify
Entities like banks, business development companies, 501(c)(3) organizations with over $5 million in assets
Directors, executives, general partners of the issuing company
Underwriters
Underwriters serve as principals by purchasing securities from the issuer and reselling to the investors, which is not the standard structure of a PIPE deal. PIPEs involve direct private placements and negotiation of the purchase agreement between the issuer and investors without an underwriting agreement. Overall, underwriters are generally not involved in PIPE deals, which predominantly use Placement Agents rather than underwriters to find investors.
Placement Agents
Issuing companies select the investment bank that will serve as the company's Placement Agent. Placement agents play a leading advisory role in PIPE transactions by identifying and soliciting potential investors, conducting due diligence, structuring deal terms, facilitating negotiations between the issuer and investors, arranging investor meetings, and closing the deal. They serve as an intermediary between the issuer and investors during the transaction.
Some of the most common placement agents I've been seeing in recent PIPE deals have been HC. Wainwright, Roth Capital, Maxim Group, Aegis Capital, Oppenheimer & Co., and Cantor Fitzgerald.
Shelf Registration
A shelf registration allows a company to register securities...
CONTINUE READING MY BOOK SUMMARY & REVIEW HERE: https://kriminiltrading.com/blogs/mus...
July 1, 2014
Clear guide to the practice.
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