PRIVATE OFFERING IN  PUBLIC EQUITY ("PIPE"):

What are “PIPEs”?

 

A PIPe (Private Investment in Public Equity) refers to any private placement of securities of an already public company that is made to selected accredited investors (usually to selected institutional accredited investors).

 

In a typical PIPe transaction, investors enter into a purchase agreement that commits them to purchase securities and usually requires the issuer to file a resale registration statement covering the resale from time to time of the privately purchased securities.

 

NOTE: Equity lines of credit are not PIPe transactions.

 

Are all public companies permitted to engage in PIPE transactions, or are there eligibility requirements?

 

Yes, all public companies that are reporting companies may engage in PIPe transactions.

 

 

Is there a limit to the number of purchasers that may participate in a PIPE transaction?

 

If all of the offerees are accredited investors, there is no limit on the number of offerees or purchasers that may participate in a PIPe transaction. However, to the extent that the issuer and the placement agent intend to rely on the exemption from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and the Rule 506(b) safe harbor, the placement agent must take care not to engage in any marketing or sales activity that would constitute a “general solicitation.”

What kinds of securities are sold in PIPE transactions?

 

PIPe transactions may involve the sale of common stock, convertible preferred stock, convertible debentures, warrants, or other equity or equity-like securities of an already-public company. There are a number of common types of PIPe transactions, including (but not limited to):

 

  • The sale of common stock at a fixed price;

  • The sale of common stock at a fixed price, together with fixed price warrants;

  • The sale of common stock at a fixed price, together with resettable or variable priced warrants;

  • The sale of common stock at a variable price;

  • The sale of convertible preferred stock or convertible debt;

  • A change of control transaction; and

  • A venture-style private placement for an alreadypublic company.

 

What are some of the advantages of a PIPE transaction?

 

A PIPe transaction offers several significant advantages for an issuer, including (but not limited to):

 

  • Transaction expenses that are lower than the expenses that an issuer would incur in connection with a public offering;

  • The issuer will expand its base of accredited and institutional investors;

  • For fixed price transactions, investors will have less incentive to hedge their commitment by shorting the issuer’s stock;

  • The transaction will be disclosed to the public only after definitive purchase commitments are received from investors;

  • Investors receive only very streamlined offering materials or information, including publicly filed exchange Act reports; and

  • A transaction can close and fund within seven to 10 days of receiving definitive purchase commitments.

 

Some of the advantages for an investor include receiving a discount to the current market price (in order to compensate for the initial resale restrictions) and, once the u.S. Securities and exchange Commission ("SEC") declares the resale registration statement effective, having unrestricted, freely tradeable securities.

 

What are some of the weaknesses of a PIPE transaction?

 

PIPe transactions have a few disadvantages for issuers, including (but not limited to):

 

  • Investors will require a discount to market on the purchase price (in order to compensate for the initial resale restrictions);

  • There will be a limit on the number of “blackout” periods for the issuer while the resale registration statement is effective;

  • As a general matter, the offering can only be marketed to accredited investors; and

  • An issuer cannot sell more than 20% of its outstanding stock at a discount without receiving prior stockholder approval.

 

 

What is a “blackout” period?

 

In connection with a PIPe transaction, an issuer typically must keep a resale registration statement effective for an agreed-upon length of time so that the securities may be sold freely, without reliance on Rule 144. During this period, the issuer may suspend the use of the resale registration statement to amend it or to remedy a material misstatement or omission. This suspension is often referred to as a blackout period. During a blackout period, PIPe purchasers will have limited liquidity, as they will not be able to rely on the resale registration statement to sell the securities purchased in the PIPe transaction. Investors will negotiate a limit on the length and number of blackout periods. A blackout period also may be referred to as a “suspension period.”

To Retain and Engage Private Placement Markets for a PIPE Offering:

Since 2017, we have prepared a large number of PIPE Offerings for companies on the NYSEMKT & NASDAQ. 

 

Service(s) to be Provided:

  • Drafting & Preparation of a State & Federal Securities Laws Compliant PIPE Offering.

    • Our Custom PIPE Offering Preparation includes (but is not limited to):

      • Offering Structuring and Development of a Presentation Grade PIPE Offering,

      • all SEC Filing(s) as required via the EDGAR (for Offer & Sales),

      • Federal & State Securities Laws Compliance Review, and

      • Access to our Broker-Dealer Network & International Institutional Investment Banking Network (See www.PPMEquity.com & www.PPMDebt.com)

To engage us for a Custom PIPE Offering Preparation:

  1. Private Placement Markets is very selective about the PIPE Clients it engages with. Please call our Capital Markets Team or email us as the contact listed to the left, and we will schedule a time to speak regarding your PIPE needs.

  2. If there is a mutual interest to engage for the Drafting of your PIPE Offering, we will forward you an engagement letter to be signed, at which time you will be required to submit a retainer equal to 50% of our service charge for the drafting of the PIPE Offering Memorandum. Our total estimated cost for a PIPE Offering is a Flat $15,000 USD (50% = $7,500 USD). NOTE: The balance of $7,500 will be due and payable 30 days net from retaining services or upon delivery of a final PIPE Offering Document whichever comes first.

  3. Once complete, we will send you an email with information detailing the necessary information we need to get started working on your offering.

  4. General Time from Start-to-Finish, given the vast number of Offerings we have done over the past four plus years, approximately one week. 

Mr. Steve Muehler

Founder & Managing Member

Private Placement Markets

101 California Street

San Francisco, CA 94111

Email: Steve@PPMSecurities.com

Phone: (877) 259-8066

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Private Placement Markets, LLC (a Delaware Limited Liability Company) provides no depository services and is not insured by the FDIC. Private Placement Markets is an Investment Banking Industry Document Preparation Company and Capital Markets Advisor. Private Placement Markets does not offer, and does not offer to provide any broker dealer or market maker services. Private Placement Markets operates this website (referred to as the “Website”). By accessing this Website and any pages thereof, you agree to be bound by its Terms of Use and Privacy Policy. Past performance is no guarantee of future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. Private Placement Markets does not provide financial planning services. Private Placement Markets does not provide tax advice and does not represent in any manner that the outcomes described herein will result in any particular tax consequence.

 

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