PIPE (private investment in public equity)
A PIPE (private investment in public equity) is a private sale of unregistered shares, warrants or convertibles by a public company to selected investors, usually followed by a resale registration.
Last verifiedHow 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.
See it on DilutionScan
Companies DilutionScan covers, with the instruments read from their SEC filings. Open one to see each instrument and the filing it came from.
- GNSGenius Group Limited8 warrant series, 1 convertible, 1 ATM program, 3 shelf registrations and 2 completed offerings on file
- SMXSMX (Security Matters) Public Limited Company Ordinary Shares10 warrant series, 8 convertibles, 2 equity lines, 4 shelf registrations, 4 S-1 registrations and 2 completed offerings on file
- HOLOMicroCloud Hologram Inc. Ordinary Shares2 warrant series, 1 convertible, 3 shelf registrations and 2 completed offerings on file
- SINTSintx Technologies, Inc.24 warrant series, 3 convertibles, 2 ATM programs, 6 shelf registrations, 1 S-1 registration and 4 completed offerings on file
Guides that use this term
- Why Penny Stocks Drop After Good News: The Offering PlaybookWhy a small-cap stock can fall on a strong press release. Registered direct and ATM mechanics, the offering math with a worked example, and the filings to read.
- Registered Direct vs PIPE vs Underwritten OfferingRegistered direct vs PIPE vs underwritten offering: how each sells a block of shares at a fixed price, how each is registered and disclosed, and what fees cost.
- Float vs Shares Outstanding: What Is the Difference?Float vs shares outstanding explained: how shares outstanding, non-affiliate float and tradeable float differ, where each is disclosed and when each matters.
- Finding the Lender and Deal Terms in SEC FilingsWhere 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.
- Concurrent Private Placement Warrants ExplainedWhat concurrent private placement warrants are, why registered direct offerings pair with unregistered warrants, and how to count the shares they add later.
- 8-K Item Codes Explained: Items 1.01 to 9.018-K item codes explained: what Items 1.01, 2.03, 3.01, 3.02, 5.02 and 9.01 mean, the four-business-day rule, and the item combinations that flag a financing.
Related terms
Check any ticker for dilution
DilutionScan reads each covered company's SEC filings and lists its warrants, convertibles, ATM programs, shelves and S-1s on one page, with a dilution rating and cash runway.
Definition from the Signal8 Academy glossary. Educational content only. DilutionScan and Signal8 are not broker-dealers or investment advisers, and nothing here is a recommendation to buy or sell any security.