The Economics of PIPEs

Jongha Lim, Michael Schwert and Michael S. Weisbech
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Jongha Lim: California State University, Fullerton
Michael S. Weisbech: Ohio State University

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: PIPEs are an important source of finance for small public corporations. We investigate the trading behavior and return performance of PIPE investors. PIPE returns decline with holding periods, while time to exit depends on the issue’s registration status and underlying liquidity. Under plausible assumptions, the average PIPE investor holds the stock for 384 days and earns an abnormal return of 21.2%. More constrained firms tend to issue PIPEs to hedge funds and private equity funds in offerings that have higher expected returns and higher volatility. PIPE investors’ abnormal returns appear to reflect compensation for providing capital to financially constrained firms.

JEL-codes: G12 G23 G32 (search for similar items in EconPapers)
Date: 2017-02
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The economics of PIPEs (2021)
Working Paper: The Economics of PIPEs (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2017-22

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