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Expertise on Private Investments in Public Equities (PIPEs)

Tuesday, March 20, 2007
Mitch Hull separates the facts from the fiction in this promising space.

A SQUARE :: 20Mar07 Expertise on Private Investments in Public Equities (PIPEs)
Category PIPEs
Faculty Mitch Hull
Expertise Private investments in public equities (PIPES)
Author Sona Blessing
Faculty Name
Mitch Hull has over a decade of experience, is founder of Hull Capital Management, LLC, and shares his insights on private investments in public equities (PIPEs)...


“In a PIPE offering there are less regulatory issues with the SEC” ... then why is investing in them perceived with such notoriety?


The “notoriety” in a PIPE transaction is really a function of historical biases created in the early days of
PIPE investing. In the mid to late 90’s PIPEs, known at the time as Reg. D Private Placements, were new
to the capital markets and the dominant transaction structure was the floorless floating convertible bond.


It was embraced by a vast majority (at present it constitutes 5% of the market). This structure is known more pejoratively as the “toxic convertible” or “death spiral” as a number of dot com companies that had used this structure experienced negative outcomes when the Internet “bubble burst”. Many of those issuers’business models proved to be failures – and some erroneously continue to blame the PIPE structure for the same.

Today, very few transactions are completed with floating conversion features.

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[21May09] [Warrants/PIPEs] A fund that holds warrants (issued in PIPE deals)
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[07May08] [PIPEs] PIPE Opportunities in China
Geography is still a challenge with China but it is mitigated in part because the companies trade in the US.

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[24Oct07] [PIPEs] Private investments in public equities FOF
With SEC regulatory changes, PIPE deal flow will increase - the strategy is increasingly being deployed outside the US, particularly in Europe and Asia.

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[02May07] [PIPEs] PipeLine Investors, LP
In 2005 Mar Hedge ranked PipeLine Investors in the Top 10 Performing Risk Adjusted Funds of Funds in the U.S.

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