This strategy involves investing directly and/or indirectly in either the common shares, convertible securities or warrants of a publicly traded company. A common form of this strategy involves providing private financing to a public company usually for a specific financing need (such as an acquisition), in an amount that is generally below investment banking thresholds. The strategy includes downside protection through collateralization, restrictive covenants, and/or short selling of the underlying stock, options, or of a correlated basket of equities. Companies taking advantage of PIPE financing are often small and medium in size, but companies of all sizes are attracted to the relatively quick and efficient nature of private financing compared with syndicated financing.
