PIPE
Proprietary Finance Ventures
123 Mission Street
San Francisco, CA 94105
(202) 596-7511
PIPE
PIPE (Private Investment in Public Equity)
Historically, PIPEs have been used to raise capital for small to middle sized publicily traded companies. Traditional or structured, PIPE is stock issued at a set price and warrants giving the investors the right to sell the stock at a premium from current market price. Typically, the investors purchase a minority stake in the issuer. Proceeds from PIPE can be used for a variety of needs, including growth capital, acquisition financing, de-leveraging, working capital and secondary sales.
Private Investments in Private Equity are popular with hedge funds because buyers usually get preferred stock or bonds that convert into shares at discounted prices.
PIPE advantages:
* SEC registration not required prior to offering. However, since PIPE are private placement of securities under federal securities laws, it is important to preserve this exemption.
* Improve balance sheet strength and financial flexibility
* Highly confidential, PIPE eliminate typical price declines on filing of traditional IPO (announcement effect)
* Minimal preparation needed before launch; fast closing (can be two weeks time between start and close)
* Increase issuer's trading liquidity level.
* Useful for a targeted marketing base.
Alternatives to PIPE include add-on equity offerings (secondary or "follow-on offerings") and 144A convertible securities. However, these transactions are typically underwritten and require large institutional and/or retail distribution networks. PIPE are a good private equity raising tactic for companies that seek equity infusions of $75 million or less and have a market capitalization of $600 million or less.
Historically, PIPEs have been used to raise capital for small to middle sized publicily traded companies. Traditional or structured, PIPE is stock issued at a set price and warrants giving the investors the right to sell the stock at a premium from current market price. Typically, the investors purchase a minority stake in the issuer. Proceeds from PIPE can be used for a variety of needs, including growth capital, acquisition financing, de-leveraging, working capital and secondary sales.
Private Investments in Private Equity are popular with hedge funds because buyers usually get preferred stock or bonds that convert into shares at discounted prices.
PIPE advantages:
* SEC registration not required prior to offering. However, since PIPE are private placement of securities under federal securities laws, it is important to preserve this exemption.
* Improve balance sheet strength and financial flexibility
* Highly confidential, PIPE eliminate typical price declines on filing of traditional IPO (announcement effect)
* Minimal preparation needed before launch; fast closing (can be two weeks time between start and close)
* Increase issuer's trading liquidity level.
* Useful for a targeted marketing base.
Alternatives to PIPE include add-on equity offerings (secondary or "follow-on offerings") and 144A convertible securities. However, these transactions are typically underwritten and require large institutional and/or retail distribution networks. PIPE are a good private equity raising tactic for companies that seek equity infusions of $75 million or less and have a market capitalization of $600 million or less.