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Private Investment in Public Equity (PIPE)

Definition:

Occurs when private investors take a sizable investment in publicly traded corporations. This usually occurs when equity valuations have fallen and the company is looking for new sources of capital. This is a means by which a public company gets additional access to the equity markets in express mode -- they already have public shares trading and this is an additional offering to investors under a securities purchase agreement, the issuer promises to register the shares typically via a resale registration statement within so many days after the closing. In context of private equity, PIPEs are the investments by a private equity fund in a publicly traded company. The investments usually take form of preferred stock at a discount.

Investing Essentials


Copyright © 2011 Campbell R. Harvey, Professor of Finance, Fuqua School of Business at Duke University

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