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VIPE Financing: Venture (Capital) Investments in Public Equity

37 Pages Posted: 26 Sep 2010 Last revised: 4 Feb 2012

Susan Chaplinsky

University of Virginia - Darden School of Business

David Haushalter

Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration

Date Written: September 24, 2010

Abstract

This paper studies 1,655 venture investments in public equity (“VIPEs”) over 1995-2008. Although it has been conjectured that venture capital firms (VCs) have increased investments in public equity over time, we find little evidence to support this claim as VIPEs represent less than 2 percent of total VC investment in most years. VCs appear to invest in VIPEs to leverage their experience and to capitalize on perceived undervaluation of the issuer’s equity shares. Consistent with this, VIPEs are highly concentrated in a few industries and VCs purchase stakes at a price 47 percent below the issuer’s previous year’s high price. We do not, however, find evidence that the experience VCs gain from investing in private companies results in an ability to consistently identify undervalued public companies.

Keywords: PIPEs, private placements, venture capital

JEL Classification: G24

Suggested Citation

Chaplinsky, Susan and Haushalter, David, VIPE Financing: Venture (Capital) Investments in Public Equity (September 24, 2010). Available at SSRN: https://ssrn.com/abstract=1682138 or http://dx.doi.org/10.2139/ssrn.1682138

Susan J. Chaplinsky (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4810 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/chaplinsky.htm

David Haushalter

Pennsylvania State University - Mary Jean and Frank P. Smeal College of Business Administration ( email )

University Park, PA 16802
United States
814-863-7969 (Phone)
814-865-3362 (Fax)

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