PIPE (private investment in public equity)
Also called: private placement, PIPE financing, private investment in public equity
A private sale of unregistered shares, warrants or convertibles by a public company to selected investors, usually followed by a registration statement so the buyers can resell.
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How it works
A public company sells securities directly to investors in a private placement exempt from registration, typically under Section 4(a)(2) of the Securities Act or Regulation D. Because the securities are unregistered, buyers cannot freely resell them at first. The purchase agreement usually comes with a registration rights agreement requiring the company to file a resale registration statement (see S-1 resale) within a set number of days, naming the investors as selling shareholders.
If no registration is filed, investors can eventually rely on Rule 144 after the holding period.
What gets sold
PIPEs can involve plain common stock at a fixed price, common plus warrants, convertible notes, or convertible preferred stock. The terms range from a straightforward sale at the market price to structures with variable-price conversion and price resets.
Worked example
Hypothetical: Company X sells 5,000,000 unregistered shares at $1.60 plus 5,000,000 warrants at $2.00, raising $8,000,000. It agrees to file a resale S-1 within 30 days. The share count rises 5,000,000 at closing, but those shares only become freely tradeable once the S-1 is effective. The warrants add up to 5,000,000 more potential shares, and up to $10,000,000 more cash if exercised.
Why it matters
The dilution happens at closing, but the supply of saleable shares often arrives later, when the resale registration goes effective. On Nasdaq, a private placement of 20% or more of the outstanding shares below the "Minimum Price" generally needs shareholder approval under Listing Rule 5635(d).
How to spot it
Look for an 8-K with Item 1.01 (the purchase agreement) and Item 3.02 (unregistered sales of equity securities), a Form D, and later an S-1 or S-3 resale registration. See Registered directs, PIPEs and underwritten deals.
Related terms
Guides that use this term
Dilution 101 · 6 min read
Registered Direct vs PIPE vs Underwritten Offering, Compared
The three common ways small companies sell a block of shares at a fixed price, how each is registered and disclosed, and what the fees do to net proceeds.
Dilution 101 · 5 min read
Float vs Shares Outstanding: Three Different Numbers and When Each Matters
Why shares outstanding, non-affiliate float and tradeable float differ, where each comes from in SEC filings, and how the choice changes the math.
Toxic financing · 6 min read
Spotting the Lender: Finding Deal Terms and Counterparties in SEC Filings
Where a financing's terms and counterparty are disclosed, from 8-K Items 1.01 and 3.02 to the securities purchase agreement exhibit, with a phrase checklist.
Toxic financing · 6 min read
Concurrent Private Placement Warrants: The Second Half of a Registered Direct
Why registered direct offerings often come with unregistered warrants in a concurrent private placement, and how to count the shares they add later.
Core forms · 6 min read
8-K Item Codes Explained: What Each Item Number Means
A field guide to Form 8-K item numbers, from 1.01 material agreements to 9.01 exhibits, and the four-business-day filing rule behind them.
Offerings & deals · 5 min read
Form S-1 Explained: IPO vs Resale Registrations, S-1/A and Effectiveness
How a Form S-1 moves from first filing to effectiveness, the difference between an IPO S-1 and a resale S-1, and what 424B4 and 424B3 mean.
Offerings & deals · 5 min read
Form D and Regulation D: Rule 506(b), 506(c) and the 15-Day Filing
What Form D discloses, how Rule 506(b) and 506(c) private placements differ, how the 15-day deadline works, and why public companies file Form D.
Corporate events · 6 min read
Lockup Expirations Explained: 180-Day Lockups, Early Releases and Leak-Outs
How IPO lockup agreements work, where their terms are disclosed, how early releases and waivers are announced, and how leak-out agreements limit selling.