PIPE Investor Trend

Dennis McCarthy – (213) 222-8260 – dennis@monarchbayassociates.com

Today, a small cap public company considering raising equity may find the alternative of using a PIPE, a private investment in a public entity, to be a more attractive option.

That’s my conclusion from the 2012 tally of PIPE investors by Placement Tracker, the well-regarded source of this data.

So, here’s the background.  When I created my Equity Series of videos to help small cap public company executives to better understand the options available to them when raising equity, I created a video on PIPEs.

In my video, I said that because a PIPE is a private investment, historically, hedge funds have been the primary investors, not the larger universe of traditional institutional investors which typically invest in public securities.

Hedge funds invest in PIPEs but negotiate terms that are expensive for the issuing company.

PIPEs, therefore, have come to be considered a relatively more expensive method for a small cap public company to raise equity vs other offering alternatives.

This year, 2012, however, reveals an interesting development.  In the 2012 PIPE investor tally, produced by Placement Tracker, 10 of the top 25 PIPE investors were not hedge funds but more traditional institutional investors.

In fact, the number one PIPE investor is a traditional institutional investor, Fidelity Investments.

So today, a small cap public company’s PIPE may be sold to a larger universe of investors including those traditional institutional investors which purchase stocks on more favorable terms, such as investing at the market price without a discount and without other sweeteners such as warrants.

This is a positive development and makes the option to raise equity through a PIPE offering more attractive.  I hope this trend continues.

I’ve included a link to the online magazine, Growth Capitalist, which first tipped me to this development.  Also, I’ve provided the 2012 PIPE Investor tally from Placement Tracker as well as the link to all its 2012 tables.

As always, please contact me to help your company to raise equity or to complete any capital market project.  

2012 US PIPE Mkt Institutional Investor League Table

Growth Capitalist Article: http://www.growthcapitalist.com/?utm_source=Growth+Capitalist&utm_campaign=a7c6c3845e-RSS_EMAIL_CAMPAIGN&utm_medium=email

Placement Tracker Article: http://www.globenewswire.com/news-release/2013/01/09/515496/10017525/en/PlacementTracker-Publishes-2012-PIPE-Market-League-Tables.html