During periods of volatility, companies and investors often seek alternative financing structures that are impacted less by rapidly changing market conditions. With companies needing financing for operations or acquisitions or facing limitations on the availability of refinancing to pay off maturing or expensive debt, a PIPE (a private investment in public equity) by an existing or new financial investor offers a potential alternative source of liquidity while representing an attractive opportunity for sponsors looking to put capital to work in a choppy M&A market.
A PIPE involves a private, non-registered issuance of securities in a public company. Sponsor PIPEs raise a number of key financial, governance and process issues that should be addressed by the parties at the outset in order to facilitate an efficient route to a desired outcome, especially since speed of execution is one of the primary benefits of a PIPE transaction.
In current market conditions, sponsor PIPE investments offer a potential alternative source of liquidity for issuers and an attractive outlet for financial investors to put capital to work.
Below we summarize some of those key considerations:
