Private Investment in Public Equity

Private investments in public equity (PIPE) have become an important financing alternative for U.S. public companies. This chapter provides an overview of the development of the PIPE market between 1995 and 2012 including its market size, industry distribution, major investors, contractual design, and the role of placement agents. Responding to concerns about the propriety of so-called death-spiral PIPE transactions entered by hedge funds, the Securities and Exchange Committee (SEC) began a series of enforcement actions in 2003. The chapter discusses these enforcement actions through regulation and the resulting structural changes in the PIPE market. Finally, the chapter describes the most recent innovations in the PIPE market such as the confidential marketed public offering (CMPO) and the at-the-market (ATM) offering.