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Survey of 2009 Technology
Private Investment in Public Equity (PIPE) Transactions

Introduction

Private investments in public equity (PIPEs) are a permanent fixture in the U.S. capital raising landscape. Once considered a financing alternative used only by public issuers unable to raise capital through more traditional means, including through registered public offerings, PIPEs are now seen by many public issuers as the preferred form of financing. According to PlacementTracker, a research company that tracks private placements, in 1998, there were 428 reported PIPE transactions in which issuers raised approximately $3 billion. By comparison, the number of reported PIPE transactions completed in 2008 was more than 1,000 representing over $110 billion in gross proceeds. Even in 2009, despite a meltdown in the U.S. financial markets, issuers completed over 800 PIPE transactions. Technology continues to be one of the most active sectors in the PIPE arena.

As the number of PIPE transactions has increased, the class of PIPE investors has expanded significantly. Earlier this decade, hedge funds, pension funds and corporate insiders represented the largest group of investors in PIPE transactions, particularly by technology companies. Today, private equity funds, sovereign wealth funds and venture capitalists groups that historically avoided making private investments in public issuershave become major participants in the PIPE market. Investments by these groups, along with a large influx of capital from foreign investors and the announcement of large PIPE transactions completed by blue chip companies, have given the U.S. PIPE market added legitimacy and spurred significant changes in the terms of PIPE transactions.

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