8.17: Note on Private Investment in Public Equity Securities (PIPES)

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Abstract

Because of fundamental and inherent infelicities in the way the Federal securities laws were initially drafted, regulators, the practicing bar, issuers and investors have long had difficulties distinguishing between public and private offerings of securities. Historically the test has been the equivalent of an "on/off" switch. Either the issuance of securities (or, indeed, a secondary transaction in securities) was a private placement or a public "distribution", to borrow the statutory language.[1] If the former, the regulatory constraints have become relatively gentle and relaxed. In the latter case, even with the advent of Regulation A, Rule 415, Rule 144A, the Small Business Amendments[2] and other putative loosenings of the regulatory collar, a registered public offering (meaning most public offerings of securities over $1 million in amount) is expensive, time-consuming and risky. There is a good deal of literature on the issue of how a privately held...

Sub-Topics

• 8.17.2: PIPEs, Small Caps and Rule 415