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 PIPE Market Sizzles As Volume Doubles |
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jeepguy
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作者：jeepguy 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
Despite SEC insider trading enforcements, deals just get bigger
Despite recent enforcement actions by the Securities and Exchange Commission involving insider trading with PIPEs, the market for these unconventional financing instruments is sizzling.
According New York research firm PrivateRaise, 959 PIPE financings were issued through June 15, 2006, amounting to $20.3 billion.
That is not only more than double the $9.44 billion in PIPE financings earned during the same period last year, but nearly equals all of the $23.01 billion in PIPE issuances recorded during 2005.
It also means that PIPE financings-PIPEs is shorthand for private investments in public equity-are "on a record pace this year" notes PrivateRaise chief executive Kurt Kim.
Even if the rate of PIPE financings slackens, their totals should outstrip the current highwater mark of $24.8 billion recorded in 2000, the year the tech bubble reached its climax.
Once regarded as a financing strategy to be used only as a last resort when conventional means were unavailable, investment bankers specializing in PIPE placements say that the explosion in financings is palpable evidence that these securities have gone mainstream.
"As a way of raising money for companies with under $250 million in market cap, I think that the PIPE market has become more legitimate, more acceptable and more preferable," says Byron Roth, chairman and CEO of Roth Capital Partners, a Newport Beach, Calif.- based investment bank that ranks eighth in number of PIPE financings, with 13 so far in 2006.
Charles Mather, a managing director at Cowen & Co., which is fifth in the number of agented deals so far this year, according to PrivateRaise (see chart), cites several factors as key drivers in the growth of PIPEs.
These include: greater recognition by companies that PIPEs are "a rapid and confidential way to raise money," he says, as well as the "healthy economy and the flow of capital to hedge funds," which account for a growing percentage of PIPE investment. The addition of such brand-name mutual funds as Fidelity and Wellington to the roster of PIPE investors, Mather adds, is also giving the PIPE markets added cachet.
Cowen acted as placement agent in the $145 million PIPE financing in late May of Pacific Ethanol, which also boasts Microsoft founder Bill Gates as a separate equity investor (see IDD, "Ethanol Sector Sees Rush of Financings," (6/26/06).
The biggest PIPE deal of the year so far was the $2.395 billion financing done earlier this month by Sovereign Bancorp. Snapping up the paper was Banco Santander, the giant Spanish bank, which thereby took a 19.8% stake in Sovereign under an agreement signed last October. Sovereign used the proceeds to help finance its acquistion of Independence Community Bank, which was also part of its complex and controversial deal with Santander.
The deal represents something of a sea change in the PIPE market, in which until recently, financings of more than $100 million raised eyebrows. So far this year, the average deal size has risen to $21.18 million, almost 50% higher than last year's average deal size of $14.2 million through the same period, according to PrivateRaise. To date in 2006, 23 PIPE financings have topped the $100 million mark.
Insider Trading
The keen interest by cash-flush hedge funds in the PIPE market may be helping drive up the volume and size of deals, but it has also contributed to the market's problems. Over the last year, the Securities and Exchange Commission has settled four enforcement cases alleging insider trading of PIPE stocks, three of which involved hedge funds.
On May 2, the SEC forced Deephaven Capital Management and its former portfolio manager, Bruce Lieberman, to pay $5.8 million in disgorgement, civil penalties and interest payments to settle insider trading charges. The agency charged that the firm, a unit of Knight Capital, used the information in 19 PIPE offerings to short company shares.
In two instances, the SEC charged, Lieberman violated purchase agreements that expressly "warranted" that Deephaven's Small Cap Growth Fund had not shorted an issuer's stock. The SEC alleged that Lieberman transferred short positions to another fund under his control in an effort to avoid detection. (In settling with the agency, Lieberman neither admitted nor denied the SEC allegations.)
The charges followed a similar, $15.8 million settlement in March between the SEC and three New York-based hedge funds known collectively as Langley Partners and their portfolio manager, Jeffrey Thorp, for allegedly shorting PIPE stocks in 23 offerings.
According to the SEC's complaint, Thorp's scheme, which was conducted between 2000 and 2002, was slightly more ingenious: In some cases, he agreed to invest in PIPE offerings and then quickly sold short the issuer's stock using Canadian broker-dealers.
In a memorandum to clients, attorneys at the prominent New York law firm Willkie Farr & Gallagher recently warned that "the continuing focus on this area by the SEC and NASD suggests that more cases may be forthcoming."
A spokesman at the SEC, however, insisted that there was no special crackdown involving trading by hedge funds into PIPEs, although "an enforcement action itself is a warning," he said. "Anyone who thinks about engaging in insider trading with PIPEs ought to take these enforcement actions into consideration."
Some market participants welcome the SEC's vigilance, which they say is bolstering the integrity of the PIPEs market-particularly as investors are increasingly obliged to sign confidentiality agreements, even those that do not ultimately invest in the PIPE.
And investors are increasingly comfortable with the SEC's scrutiny as well. "My clients-which are big mutual funds and hedge funds-are well within the law and take their obligations seriously," says Jocelyn Arel, a partner at Boston law firm Goodwin Proctor.
作者：jeepguy 在 海归商务 发贴, 来自【海归网】 http://www.haiguinet.com
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 PIPE Market Sizzles As Volume Doubles -- jeepguy - (6094 Byte) 2006-7-06 周四, 10:58 (655 reads)
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