Private Investments in Public Equity (PIPEs) – A Closer Look at PIPE Transactions in Switzerland

Gerhard Frank
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Gerhard Frank: *Dr.iur., Attorney-at-Law, LL.M (Columbia), partner, Homburger AG, Zurich.

European Company and Financial Law Review, 2008, vol. 5, issue 3, 305-352

Abstract: PIPEs allow to raise equity in a quick, confidential, secure, flexible and cost-effective way. Companies that typically have recourse to PIPE financing are not in a position to proceed to a rights offering which would be likely to fail because of the difficult market environment, or they are not able to get new funds by way of a bank loan due to their revenue and profit situation. Such companies are especially active in capital-intensive and growth-oriented industry sectors such as the biotechnology, pharmaceutical, technology and telecommunications industry. However, in Switzerland PIPEs have not been discovered (yet) as a genuine fund raising alternative, mainly because they are considered to be difficult to structure, e.g. due to the statutory pre-emptive right of the existing shareholders. Evidence suggests that in Switzerland, too, PIPEs are not only suitable for recapitalization, but also for growth financing purposes. This article tries to set out, inter alia, the possibilities of withdrawing the pre-emptive right or the cases in which such a disapplication would be desirable in order to widen the scope of PIPEs in Switzerland – especially with mid- and small-cap companies –, as well as the legal consequences of such PIPE transactions.

Date: 2008
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DOI: 10.1515/ECFR.2008.305

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