PIPE offerings are a relatively fast way for public companies to raise capital in a private placement without the cost and delay of an underwritten public offering."PIPE" stands for "private investment in public equity."
While sometimes perceived as a last resort for distressed companies, PIPEs have nonetheless become a popular financing alternative for small and mid-sized companies that have limited access to the capital markets or large companies that simply want quicker execution.
However, recent interpretations by the Securities and Exchange Commission of its Rule 415, which is the SEC rule governing so-called "shelf registrations" used in PIPE offerings, has chilled the PIPE market. These interpretations, issued through a series of SEC comment letters sent to participants in PIPE offerings, essentially state that PIPEs are primary offerings of the issuer and that PIPE investors are underwriters under the securities laws, which translates to increased liability exposure.
