Post by fastwalker on Sept 25, 2004 19:24:43 GMT -5
Q: So, why would a lawyer (Glenn) with his type of background go with a 300 billion increase in the A/S?
A: Possibly a private placement of 200 billion shares? and the additional 300 billion may also be a private placement? (specualtion)...
A PIPE (Private Investment into Public Entity) refers to any private placement of securities of an already-public company that is made to selected accredited investors who enter into a purchase agreement committing them to purchase securities and, usually, requiring the issuer to file a resale registration statement covering the resale of the securities. Equity lines of credit, are not PIPE transactions.
PIPE transactions may involve the sale of common stock, convertible preferred stock, convertible debentures, warrants, or other equity or equity-like securities of an already-public company.
What are some of the advantages of a PIPE transaction?
A PIPE transaction offers several significant advantages for an issuer, including:
lowering transaction expenses;
expanding institutional and accredited investor holdings;
for fixed price transactions, reducing the incentive for investors to hedge their commitment by shorting the issuer's stock;
requiring disclosure of the transaction to the public only after definitive purchase commitments are received from investors;
requiring preparation by the Issuer only of very streamlined information, including publicly filed Exchange Act reports; and
enabling a transaction to close and fund within seven to ten days of receiving definitive purchase commitments.
How do traditional PIPE transactions differ from non-traditional PIPE transactions?
In a traditional PIPE transaction, the investor bears the price risk from the time of pricing until the time of closing. The issuer is not obligated to deliver additional securities to the PIPE investors in the event of fluctuations in stock price or otherwise. Investors enter into a definitive purchase agreement with the company in which they commit to purchase securities at a fixed purchase price. Investors do not fund at the time of entering into the purchase agreement. Instead, the company then files a resale registration statement covering the resale of those securities by the PIPE investors. The transaction closes once the SEC has indicated its preparedness to declare effective the resale registration statement. Consequently, the traditional PIPE investors have available a resale registration statement at the time of closing.
Non-traditional PIPE transactions generally are structured as private placements with follow-on (or trailing) registration rights. This means that once investors enter into a definitive purchase agreement, a closing is scheduled. Investors fund and the transaction closes. Post-closing, the company has an obligation to file a resale registration statement and use its best efforts to have it declared effective.
At the closing of a traditional PIPE transaction, purchasers receive legended securities.
What are the benefits of traditional PIPE transactions compared to non-traditional PIPE transactions?
A traditional PIPE reduces uncertainty, market risk, and illiquidity compared to a private placement PIPE.
Purchasers in a traditional PIPE are not required to close until a resale registration statement is available for subsequent sales of the shares purchased in the PIPE transaction. Traditional PIPE purchasers are able to obtain unlegended shares shortly after, or at, closing, allowing purchasers flexibility in disposing of the shares.
For most registered investment funds, securities purchased in a traditional PIPE are counted in the funds' public basket. This broadens the scope of potential investors for traditional PIPEs and also generally justifies better pricing.
For more information...see the following link...
www.legalandcompliance.com/articles/pipe.html
