SYNDICATE LEGAL SUPPORT SERVICES

PRIVATE OFFERING IN  PUBLIC EQUITY ("PIPE"):

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What are “PIPEs”? 

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A PIPE (Private Investment in Public Equity) refers to any private placement of securities of an already public company that is made to selected accredited investors (usually to selected institutional accredited investors).

 

In a typical PIPE transaction, investors enter into a purchase agreement that commits them to purchase securities and usually requires the issuer to file a resale registration statement covering the resale from time to time of the privately purchased securities.

 

NOTE: Equity lines of credit are not PIPE transactions.

 

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Are all public companies permitted to engage in PIPE transactions, or are there eligibility requirements?

 

Yes, all public companies that are reporting companies may engage in PIPE transactions.

 

 

Is there a limit to the number of purchasers that may participate in a PIPE transaction?

 

If all of the offerees are accredited investors, there is no limit on the number of offerees or purchasers that may participate in a PIPe transaction. However, to the extent that the issuer and the placement agent intend to rely on the exemption from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and the Rule 506(b) safe harbor, the placement agent must take care not to engage in any marketing or sales activity that would constitute a “general solicitation.”

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What kinds of securities are sold in PIPE transactions?

 

PIPe transactions may involve the sale of common stock, convertible preferred stock, convertible debentures, warrants, or other equity or equity-like securities of an already-public company. There are a number of common types of PIPe transactions, including (but not limited to):

 

• The sale of common stock at a fixed price;

• The sale of common stock at a fixed price, together with fixed price warrants;

• The sale of common stock at a fixed price, together with resettable or variable priced warrants;

• The sale of common stock at a variable price;

• The sale of convertible preferred stock or convertible debt;

• A change of control transaction; and

• A venture-style private placement for an alreadypublic company.

 

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What are some of the advantages of a PIPE transaction?

 

A PIPE transaction offers several significant advantages for an issuer, including (but not limited to):

 

• Transaction expenses that are lower than the expenses that an issuer would incur in connection with a public offering;

• The issuer will expand its base of accredited and institutional investors;

• For fixed price transactions, investors will have less incentive to hedge their commitment by shorting the issuer’s stock;

• The transaction will be disclosed to the public only after definitive purchase commitments are received from investors;

• Investors receive only very streamlined offering materials or information, including publicly filed exchange Act reports; and

• A transaction can close and fund within seven to 10 days of receiving definitive purchase commitments.

 

Some of the advantages for an investor include receiving a discount to the current market price (in order to compensate for the initial resale restrictions) and, once the u.S. Securities and exchange Commission ("SEC") declares the resale registration statement effective, having unrestricted, freely tradeable securities.

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What are some of the weaknesses of a PIPE transaction?

 

PIPE transactions have a few disadvantages for issuers, including (but not limited to):

 

• Investors will require a discount to market on the purchase price (in order to compensate for the initial resale restrictions);

• There will be a limit on the number of “blackout” periods for the issuer while the resale registration statement is effective;

• As a general matter, the offering can only be marketed to accredited investors; and

• An issuer cannot sell more than 20% of its outstanding stock at a discount without receiving prior stockholder approval.

 

 

What is a “blackout” period?

 

In connection with a PIPE transaction, an issuer typically must keep a resale registration statement effective for an agreed-upon length of time so that the securities may be sold freely, without reliance on Rule 144. During this period, the issuer may suspend the use of the resale registration statement to amend it or to remedy a material misstatement or omission. This suspension is often referred to as a blackout period. During a blackout period, PIPe purchasers will have limited liquidity, as they will not be able to rely on the resale registration statement to sell the securities purchased in the PIPe transaction. Investors will negotiate a limit on the length and number of blackout periods. A blackout period also may be referred to as a “suspension period.”

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To Retain and Engage Syndicate Legal Support Services for a PIPE Offering:

 

Syndicate Legal Support Services regularly works with companies and their legal counsel with respect to the drafting of Private Placement Memorandums for PIPE Offerings; we consider it one of our specialties. The process of drafting the Private Placement Memorandum for a PIPE can take anywhere from a couple of days to a couple of weeks, depending on the amount of material and the complexity of the Offering.

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Service(s) to be Provided:

• Drafting & Preparation of a State & Federal Securities Laws Compliant PIPE Offering.

  • Our Custom PIPE Offering Preparation includes (but is not limited to):

    • Offering Structuring and Development of a Presentation Grade PIPE Offering,

    • all SEC Filing(s) as required via the EDGAR (for Offer & Sales),

    • Federal & State Securities Laws Compliance Review, and

    • Access to our Broker-Dealer Network & International Institutional Investment Banking Network.

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RATES:

Rates will be based on an Hourly Rate of $45.00 per hour plus expenses incurred including, but not limited to, postage and purchase of any special software necessary to complete task. Time to complete the job will be estimated and any projects estimated over $200.00 will require a TBD down payment. Syndicate Legal Support Services Bills for Services Rendered each week. Syndicate Legal Support Services requires a signed contract, which outlines the project details, prior to beginning any work. 

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