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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
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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