08 Sep PIPE Funds Raising Money

According to The PIPEs Report (yes they are still around!), private equity funds active in the private investment in public equity (PIPE) market have raised quite a bit of money recently. The funds tend to have a big healthcare focus and invest in both public and private companies. At least 5 funds in North America have completed fundraising in just the last few months, and the report indicates that more are in fundraising mode as we speak.

The attraction of course is that while a PIPE means you can’t immediately sell public company stock you acquire, you trade that timing risk for a nice discount on the trading price and bet that when you can sell a few months later the price is even higher. Also companies get money fast, and PIPEs are good for smaller public issuers that are not eligible for short form registration and “registered direct” deals done with immediately tradable stock. But the market turmoil after 2008, plus investigations into some PIPE funds as to how they were valuing these restricted securities, pushed most investors to focus more on only liquid investments.

As the market continues to heat up (despite the current hiccup), the supply for capital is starting to catch up with the demand. Let’s hope this is just the beginning. Go PIPEs!