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Survey of 2008 Technology Private Investment in Public Equity (PIPE) Transactions

January 26, 2009

By Prepared Robert Claassen, Jeffrey Hartlin, Scott Joachim and Michael Zuppone

Private Investment in public equity (PIPEs) have quickly become 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 $120 billion in gross proceeds. The pool of PIPE investors has changed over this period as well. 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 capitalistsgroups that historically avoided making private investments in public issuershave become major participants in the PIPE market. The number of foreign investors participating in PIPE offerings by U.S. issuers also has increased dramatically over this period. Together, these groups have given the U.S. PIPE market added legitimacy and spurred significant changes in the terms of PIPE transactions.