New York, Jan. 24, 2011 (GLOBE NEWSWIRE) -- In response to the continued volatility and uncertainty in the public markets, there has been an increase in popularity of hybrid financing vehicles such as PIPEs and registered direct offerings for public companies seeking to raise capital.
According to James Tanenbaum, chair of Morrison & Foerster’s Global Capital Markets practice, these transactions formats, which have attributes of both private placements and public offerings, offer several unique advantages under these market conditions.
In this exclusive LegalMinds/NASDAQ Securities & Capital Markets Series interview, filmed at the NASDAQ MarketSite Broadcast Studio in Times Square, Tanenbaum explores the advantages and disadvantages of PIPEs and registered direct offerings, as well as disclosure requirements, "best-efforts" offerings and "wall-crossed" transactions.
"In the case of PIPEs," says Tanenbaum, these advantages include "speed, costs and certainty of execution." He explains that "one of the greatest things about a PIPE is that an issuer will be able to see whether there is a transaction available, who the investors are, and what price they’re prepared to pay before there’s any public knowledge that the company is contemplating a transaction - and also before they have undertaken the cost associated with getting the transaction completed."
Tanenbaum does point out that one of the disadvantages with executing a PIPE is that they tend to be priced at a discount to market. He also adds that from the purchaser’s perspective "there may be times when the resale registration statement that they would typically benefit from has to be suspended - so called ‘blackout periods’."
While PIPEs have been the preferred transaction, for some issuers - particularly those who have existing shelf registration statements - there’s a variant of a PIPE that may be more attractive under many circumstances and that’s a registered direct, which is in essence an agency public offering.
From the perspective of his clients, Tanenbaum says "the real appeal of a registered direct is quite similar to the appeal of a PIPE, and that is that they can conduct on a confidential basis conversations with potential institutional purchasers, and determine whether there exists the likelihood that they can get a deal executed before the knowledge of the financing becomes public."
As far what the future holds, Tanenbaum observes that "what you see is that these private and hybrid and public offering technologies are tending to merge and there is a continuing coalescence of the attributes. And that for us portends a very interesting and lively future."
The interview can be viewed at http://legalminds.tv/nasdaq/tanenbaum-hybrid and will also soon be accessible on SocialStream@NASDAQ (http://social.nasdaqomx.com). In addition, the full-length interview will be published in the upcoming issue of LegalMinds™ digital magazine (www.legalmindsmagazine.com).
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