Series 82: Private Investment In Public Equity (PIPE) Transactions

Private Investment in Public Equity (PIPE) Transactions

A public offering can be risky for a company whose new issue might dilute the value of its existing stock. In addition, public offerings can be expensive and time consuming for management.

In the 1990s, the SEC created a way for publicly traded companies to raise money without going through a public offering. This financing technique allowed already public companies to sell private placements to accredited investors. These kinds of private placements are referred to as private investment in public equity (PIPE) transactions. A PIPE is typically carried out under Regulation D, Rule 506(b).

In a private placement, an issuer sells common stock to accredited investors in private placement. PIPE transactions come in several types. In one type, common stock is sold at a discount to the market price. Under a second type, the issuer sells stock at a discount to curre