Private Investment in Public Equity - Explained
What is a PIPE Deal?
Written by J. Mance Gordon
Updated at April 22nd, 2024
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What is a Private Investment in Public Equity?
A private investment in public equity (PIPE deal) is when a public company sells some of its shares (either common shares or preferred shares) directly to private investors - rather than selling the shares to the general public through a securities exchange.
How Does a PIPE Deal Work?
Because a PIPE deal is a direct offering of securities, it must be registered separately with the Securities and exchange commission or quality for a registration exemption as a private placement. A firm that trades publicly is able to use PIPE deals to secure financing for acquisitions, working capital, and expansion. The process generally allows the company to secure capital more rapidly than pursuing sale of shares to the public.