PRIVATE INVESTMENT PUBLIC EQUITY

There are numerous Private Investment Public Equity transactions that take place each year. The number of transactions and the amount of capital raised in these transactions continues to grow each year. As bank financing, credit facilities and other lending sources tighten up, companies that have no access to debt financing will have no viable alternative other than to raise capital by selling equity, such as common stock or convertible securities.

Some Private Investment Public Equity or PIPE transactions can actually be structured as convertible debt securities comprised of debt with an equity kicker. Asset based lending firms which are primarily private equity firms have been around for awhile and dominate this market. However, given the current state of the economy and the capital markets, hedge funds have now entered this market and become hybrid hedge fund/private equity players.

The difference between private equity investments and hedge fund investments is that generally speaking, hedge funds prefer liquidity or an exit strategy that involves a publicly listed company. Also, most hedge funds do not have a very long term investment strategy when it comes to the investments they make. On the other hand, private equity firms often make investments for a 3 to 5 year period.

Hedge funds and occasionally private equity firms, will provide PIPE funding in the form of convertible debt financing, but at interest rates higher than would be charged by a bank.

The TARP funding provided by the US government in 2009 was actually a form of PIPE funding, but of course, since it was provided by the government it wasn't "private investment".

For more information on Private Investment Public Equity transactions see PIPE Funding.

Here is some other information on what is meant by a PIPE Fund.

For information on structuring and deal terms for funding see Deal Terms.