PIPE Dreams? The Performance of Companies Issuing Equity Privately
- Topics:
- Insurance,
- Investment and Capital Markets
- Tags:
- Alternative Financing,
- Security,
- Performance Management,
- Performance,
- National Bureau Of Economic Research,
- Human Resources,
- Financing Startups,
- Finance,
- Equity,
- Workforce Management
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Overview: Private Investments in Public Equity (PIPEs) have become an important source of financing for young, publicly traded firms whose poor operating performance may limit alternative financing options. The paper proposes that firms are motivated to sell these securities to minimize costs associated with asymmetric information. We find that both the security structure and the investor composition of a PIPE security matter in the subsequent performance of the issuing firm. Poor post-issuance performance is associated with securities where investors obtain significant re-pricing rights, which protect them from future stock price declines.
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Format: PDF | Size: 436KB | Date: Dec 2004 | Pages: 54
