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Death spiral PIPEs: a reconsideration of the evidence

Author

Listed:
  • Karen Benson
  • Martina K. Linnenluecke
  • David Morrison
  • Sviatoslav Rosov

Abstract

We challenge the view that PIPEs lead to unfavourable outcomes for issuing firms. We show that structured PIPEs do not have significant negative CARs when a matched firm benchmark is used for computing CARs and when sample selection bias is taken into account. Indeed, structured PIPEs have significantly higher positive skewness, indicating superior optionality, consistent with the real option argument. We also show that the 2002 intervention by the Securities and Exchange Corporation (SEC) has led to unintended consequences, with the substitution of ‘mom and pop’ investors for hedge fund investors in the structured PIPE market.

Suggested Citation

  • Karen Benson & Martina K. Linnenluecke & David Morrison & Sviatoslav Rosov, 2020. "Death spiral PIPEs: a reconsideration of the evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 4175-4194, December.
    • Handle: RePEc:bla:acctfi:v:60:y:2020:i:4:p:4175-4194
    DOI: 10.1111/acfi.12535
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    References listed on IDEAS

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