PIPES - The New Source of Financing for European Companies?
Abstract: This paper investigates the firm and transaction characteristics of PIPE issuers. Whereas previous empirical studies have been focused on the U.S. market, this paper focuses on the characteristics of the European market and also examines the importance of PIPEs as a source of financing and the impact of the institutional settings in key European countries. My findings show that many PIPE issuers are poor performing companies with high R&D expenditures in need of financing to keep their investment levels. I also find that the PIPE may act as a supplement, and cater the needs of firms with difficulties to obtain financing in the public space, and that these firms significantly underperform the market in the long run. My results further indicate that the institutional settings in Europe may act as a barrier in the PIPE market as evident from the low issue fractions and small transactions.
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