PIPE Deals Studied

Hedge funds used to be a large part of the market for private investments in public equity, but some are wary these days. While regulators look for evidence of inside trading, fund analysts have a different concern—-they scrutinize the valuation of the securities. 

“There is less issuance,” says one specialist. “It’s hard to get good deals.” Nevertheless, some funds made high returns on PIPEs in the past few months and there is interest in finding worthwhile investments.

PIPEs, once the province of small companies, became mainstream in recent years—as is clear from information one finds in The Issuer’s Guide to PIPEs, a comprehensive handbook edited by Steven Dresner and published by Bloomberg Press. Warren Buffet used the PIPE format to invest in Goldman Sachs.

But the volume of PIPE financing peaked in 2007. In 2010 it was about half of what it had been three years ago—around $40 billion compared to over $80 billion. This year is expected to bring growth and accessible deals. “There could be great opportunities,” says the specialist.

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Tags: Bloomberg, private investments, Steven Dresner, Warren Buffett