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Eleazer Klein
PIPEsCurrent Issues ― A Legal And Regulatory Overview
What Is A PIPE?
“Private Investment in Public Equity”
Marketplace Includes:
– PIPE Structures
– Registered Directs
– Equity Lines
– SPACs
– High Yield Style Deals
PIPE Structures
• Common Stock
• Convertible Preferred
• Convertible Debt
• Warrants
• 144A
Typical Deal Timeline
ContactEffectiveness of Registration Statement
Term Sheet Signing Closing
Negotiation Registration
Filing of Registration Statement
Legal Hot Buttons
• Material Non-Public Information– Pre-Transaction– Post-Transaction
• Hedging Strategies– Pre-Closing– Pre-Borrow / “Icing”– Post-Closing
• Trading Limitations– Affiliates– Board Seats
• Section 13– 5% Reporting Threshold– Passive (13G) vs. Active (13D) Status
• Section 16– 10% Reporting Threshold
Regulatory Issues
• Stock Market Regulation– Discounted Issuance (20%) Rules
• Tax Considerations– FIRPTA
– Real Estate Holding Company
– Withholding / Tax Gross Up
• Hart-Scott-Rodino– $ 56.7 Million Threshold
– Passive Investor Exemption for <10% Holder
• Security Interests