The Decline in the Cost of Private Placements

38 Pages Posted: 11 Mar 2009

See all articles by Mark R. Huson

Mark R. Huson

University of Alberta - Department of Finance and Statistical Analysis

Paul H. Malatesta

University of Washington - Michael G. Foster School of Business

Robert Parrino

University of Texas at Austin - Department of Finance

Date Written: March 10, 2009

Abstract

This study documents and examines a decrease in the price discounts associated with private investments in public equity (PIPE) issues. PIPE discounts decreased from an average of 16.4 percent during the 1995 to 2000 period to an average of 9.8 percent during the 2001 to 2007 period. This decrease reflects changes in the characteristics of the public firms that are accessing the PIPE markets as well as changes in the pricing of issue characteristics. In addition, part of the decrease is attributable to contracting practices that caused PIPE discounts in recent years to better reflect market conditions on the day that the securities were issued.

Keywords: Private Placements, Equity Issues, PIPEs

JEL Classification: G10, G32

Suggested Citation

Huson, Mark R. and Malatesta, Paul H. and Parrino, Robert, The Decline in the Cost of Private Placements (March 10, 2009). AFA 2010 Atlanta Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1356650 or http://dx.doi.org/10.2139/ssrn.1356650

Mark R. Huson

University of Alberta - Department of Finance and Statistical Analysis ( email )

4-20C Business
University of Alberta
Edmonton, Alberta T6G 2R6
Canada
780-492-2803 (Phone)
780-492-3325 (Fax)

Paul H. Malatesta

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

Robert Parrino (Contact Author)

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-5788 (Phone)
512-471-5073 (Fax)

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