A substantial private placement or “private investment in public equity” (a PIPE) involves the direct or indirect acquisition of a control position in a public company by an investor through the purchase of shares of the target and (in most cases) warrants or debentures that are convertible into shares of the target.
A PIPE allows an investor to acquire a substantial equity position at a discount and an option on the equity to reward future performance while affording the investor the ability to influence and re‑invigorate corporate strategy.
For management a PIPE affords capital to exploit growth opportunities in a down market and creates a lead investor that can support later capital market fund raising. For shareholders, a PIPE is an alternative to M&A (or worse outcomes) and offers the opportunity to realize substantial value later in the cycle as commodity prices recover.
Our PIPE toolkit is a summary of the key commercial, regulatory and tax considerations for investors and targets contemplating a PIPE. We have also reviewed some of the terms of representative PIPE transactions