Examining the Pipeline- A Contemporary Assessment of Private Inve
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Examining the Pipeline- A Contemporary Assessment of Private Inve
ArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private InveoductionAn explosion of capitalistic innovation has profoundly impacted the modem investment landscape.* 1 2 3 This increase in entrepreneurial activity has precipitated a corresponding increase in the demand for capital both for starting new business ventures and for managing a pre-existing company Examining the Pipeline- A Contemporary Assessment of Private Inve's operational needs for capital.' As a result, capital formation, as defined as a company's ability to effectively and efficiently raise capital forExamining the Pipeline- A Contemporary Assessment of Private Inve
various needs at different junctures in its life, will undoubtedly remain an integral economic process. Fortuitously, this increased demand for capitaArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Invey or debt markets, such as the Rule 144A markets.1 Similarly, these companies may♦ Rupert and Lillian Radford Professor of Law and Senior Associate Dean foi Research. Southern Methodist University Dedman School of Law.♦♦ Associate. Weil. Gotshal & Manges LLP. The views expressed in this article are Examining the Pipeline- A Contemporary Assessment of Private Invesolely those of the authors and do not necessarily reflect the views of Weil. Gotshal & Manges LLP or its clients1.See Steven Dresner, introduction toExamining the Pipeline- A Contemporary Assessment of Private Inve
PIPES.- A GUIDE TO PRIVATE INVESTMENTS IN PUBLIC EQUITY 4 (Steven Dresner & E. Kurt Kim eds.. rev. & updated ed. 2006) ("Changing market dynamics wilArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Inveation in tire design of deals ”).2.Id. Marc I. STEINBERG. UNDERSTANDING SECURITIES Law § 3.01 (4* ed. 2007).3.See Scott J. Gelbard, Institutional Private Placements and Other Financing Alternatives. in PRACTISING LAW INSTITUTE CORPORATE Law & PRACTICE COURSE Handbook course Handbook Series 532 (1997 Examining the Pipeline- A Contemporary Assessment of Private Inve) I "Rule 144 A provides a safe harbor exemption from the registration requirements of the Securities Act of 1933. as amended. for12u. OF PENNSYLVANIAExamining the Pipeline- A Contemporary Assessment of Private Inve
JOURNAL OF BUSINESS Law (Vol. 11:1seek to tap into alternative pools of capital by conducting registered public offerings or by employing various othArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Inveoptions available for enterprises paints an optimistic picture for a company seeking capital, several realities diminish a wholesale acceptance of this proposition. First, market dynamics can often adversely impact a company's ability to raise capital.5 To illustrate, a recent comprehensive assessme Examining the Pipeline- A Contemporary Assessment of Private Invent of U.S. markets indicates that these markets are experiencing a Significant decline in competitiveness.6 This deterioration may effectively depressExamining the Pipeline- A Contemporary Assessment of Private Inve
economic activity, reducing the willingness of financial institutions to undertake the requisite funding and otherwise severely impeding capital formArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Inve of unregistered securities to Qualified Institutional Buyers CQIBS').'■); Stephen M Graham. Financing Alternatives for Public Companies, in PRACTISING Law Institute CORPORATE Law & PRACTICE Course Handbook series 111-116 (2006) (describing the general structure of Rule 144A debt offerings); see als Examining the Pipeline- A Contemporary Assessment of Private Inveo Sagient Research, http: www.sagientresearch.com pt'Gstats.cfm'?Type=2 (last visited Oct. 21. 2Examining the Pipeline- A Contemporary Assessment of Private Inve
A exemptions totaling 852,321.981.500. in 2007).4.See Harold s. Bloomenthal & Samuel Wolff, going Public Handbook § 2:78 (2007) (stating that private ArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Inveamond In the Rough Theory: Dispelling the IPÚ AẠ th and Following the Regulation A and Reverse Merger Examples. 35 HOFSTRA L. REV 1865. 1898-1908 (2007) (discussing the pros and cons of regulation A exemptions and reverse mergers as alternatives to registered public offerings). -See generally Richar Examining the Pipeline- A Contemporary Assessment of Private Inved A. BOOTH. Financing the Corporation 5 1:8 (2008) (discussing sources of capital for established businesses).5.COMMITTEE on Capital Markets RegulatioExamining the Pipeline- A Contemporary Assessment of Private Inve
n. The Competitive Position of theU.S. PUBLIC Equity Market 32(2007). available athttp: www.capmktsreg.orgpdfsThe_Competitive_Position_of_the_US_PubliArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Invet years. From 2006 to 2007. most measures [assessing the U.S. markets] either continued to decline or failed to substantially improve."); see also id. (noting that continuation of this trend will likely have a significant negative impact on the activity of U.S. capital markets, including the formati Examining the Pipeline- A Contemporary Assessment of Private Inveon and efficient allocation of capital).6 Id (noting that the decline in the competitiveness of the u s private equity markets has a negative impact oExamining the Pipeline- A Contemporary Assessment of Private Inve
n the U.S. economy in aggregate and is "continuing amid challenging market conditions worldwide and growing concern about U.S. economic fundamentals”)ArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Invece on Hedge Funds. Report on Section 3(C)(1) of the Investment Company Act of 1940 and Proposals to Create an Exception for Qualified Purchasers. 51 Bus. LAW. 773. 79] (1996) (calling for a reexamination of the rationale of Section 3(c)(1) due to its impediment on investment vehicles, and thus, oa c Examining the Pipeline- A Contemporary Assessment of Private Inveapital formation).200SJPrivate Investments in Public Equity3financing needs? More than ever, affected companies aggressively seek financing options thExamining the Pipeline- A Contemporary Assessment of Private Inve
at offer the dual objectives of versatility and efficiency.One recent financing alternative that is steadily gaming recognition as a viable capital loArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Invet means lor a publicly-traded company to procure capital funding. This level of approbation in the United Stales is due in part to the legal and regulatory U.S. framework that enables these transactions to be consummated with relative ease.’1 PTPTs are particularly important in the contemporary fina Examining the Pipeline- A Contemporary Assessment of Private Invencing environment as current market conditions preclude many companies from accessing traditional public and private sources of financing."From a tranExamining the Pipeline- A Contemporary Assessment of Private Inve
sactional perspective. PIPES are privately issued equity or equity-linked securities that are normally sold to "accredited investors”8 9 10 11 128.SeeArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private InveiiwncingOJ pdf (“Securities regulators in the United States and Canada have been called upon increasingly in recent years to demonstrate flexibility in the face of market realities and competitive challenges and to be sensitive to the proposition that the speed and efficiency with which issuers can Examining the Pipeline- A Contemporary Assessment of Private Invegam access to capital markets directly affects their success.”): see also Laura Mueller. The Big Squeeze. AIRLINE Bus.. Feb. 2008. at 48 (”[u]ncertainExamining the Pipeline- A Contemporary Assessment of Private Inve
market conditions could result in fewer capital market financings, as the costs of tliese deals have risen relative to the economic benefits realizedArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Invekets and managers of public companies gain increasing access to information on the topic of private investments in public equity").10.See Barbara A. Jones et al.. Structuring PIPE Transactions in Key European Jurisdictions. 37 INTL1.. 23,23 (2003) ("PIPE transactions have not enjoyed the same level Examining the Pipeline- A Contemporary Assessment of Private Inveof popularity’ in Europe as in the United States, in large part because the legal and regulatory framework in many European jurisdictions hinder liteExamining the Pipeline- A Contemporary Assessment of Private Inve
ease with which such transactions can be completed" ).11.See supra notes 7-8 and accompanying text: see also Richard E Gormley. Overview: An Emerging ArticlesExamining the Pipeline:A Contemporary Assessment of Private Investments in Public Equity (“PIPES”)Marc I. Steinberg* Emmanuel Ư. Obi**I. Intro Examining the Pipeline- A Contemporary Assessment of Private Invee for public companies in circumstances in which a public follow on equity or equity-linked offering is not desirable, advisable, or possible."). $? generally Graham, supra note 3. at 79 (discussing how it is increasingly more common for public companies in need of capital to choose alternative s Examining the Pipeline- A Contemporary Assessment of Private Inveources of funding other than traditional public offerings).12.17 c F.R. § 230.501(a) Í2008) (defining an ■ accredited investor [asj any person who comExamining the Pipeline- A Contemporary Assessment of Private Inve
es within any of lite following categories, or who the issuer reasonably believes comes within any of the following categories ... al the lime of theGọi ngay
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