Scimitar Equity Blog

                                  Referencing our multiple financing structure posts re PIPEs and RDOs; a new survey identifies key drivers of private investment in public equities in “next” 12-18 months. The survey conducted in Q3/09, canvassed the opinions of experienced PIPE investors, private equity practitioners, venture capital investors, hedge fund managers and mutual fund investors.

(Source:  mergermarket in conjunction with Kramer Levin Naftalis & Frankel LLP and Rodman & Renshaw LLC)

• 49% – of respondents “expect” to see an increase in their firm’s PIPE investment activity over the next 12 to 18 months,
• 43%  – “expect” their firm’s activity to remain at its current level,
• 82% – of respondents “expect” to see an increase in the volume of registered direct offerings (RDOs) due to their uniquely appealing features for issuers,
• 82% - of respondents “expect” the lower mid-market range to offer the highest volume of PIPE opportunities,
• 54% – of respondents “expect” to see the greatest demand for PIPEs in the Healthcare, Biotechnology and Life Sciences industry.

Bottom Line:  The resonating word throughout the suvey is “EXPECT’” as transaction are driven to finance operations or repay debt:

• 73% – of respondents “expect” to see more single investor deals than syndicated deals over the next 12 to 18 months,
• 58% – of respondents “expect” private equity firms to be the most active investors in PIPEs this year,
• 49%  – of respondents describe their PIPE investment strategy as long-term, or more than 2 years,
• Another interesting point is that 80% – of respondents “expect” PIPE deals to exclude registration rights from deal terms going forward in response to changes to holding period requirements under Rule 144 for non-affiliates,
• The shortening of the holding period for non-affiliates to 6 months has a positive impact on the value of securities sold in exempt transactions as discounts attributable to resale restrictions (by PIPE investors) require that the resale of these securities be registered by the issuer with the SEC within a short period of time after the private placement closes.