PIPE Dreams: Private Investments in Public Equity

A private investment in public equity (PIPE) is an alternative to traditional capital markets transactions and a financing option for public companies. A PIPE consists of a private offering of unregistered securities exempt from the registration requirements of Section 5 of the Securities Act of 1933. A PIPE is typically structured as a private placement under Rule 506 of Regulation D. Under Rule 506, an offering can include an unlimited number of accredited investors and up to 35 non-accredited investors. Under the recent amendments to Rule 506, issuers can choose to comply with Rule 506(b) which prohibits any form of general solicitation or general advertising, or Rule 506(c) which allows for general solicitation provided that each purchaser is an accredited investor, and the issuer takes reasonable steps to verify that each purchaser is an accredited investor.

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Related Content

• PIPEs and Raising Capital
  Consult this practice note describing the advantages of PIPE transactions, including quick access to capital on a relatively short and certain time frame, and lower transaction costs.
• Investment Strategies for Private Equity
  Read this practice note that reviews different types of investment strategies commonly employed by private equity funds, including the use of PIPEs as part of a fund’s growth equity strategy.
• Common Stock Warrant (PIPE Offering)
  Review this template warrant to purchase common stock that may be used in a PIPE transaction and is typically issued as an equity "kicker" to an investment in common stock or convertible securities.

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