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Q3 PIPEs League Tables: Most Deals, Dollars Ever

By Paul Springer | Published on October 16, 2020

The third quarter set a historical record, outpacing all previous quarters in both deals and dollars, as it saw more than 600 PIPEs and more than $47 billion in capital potentially raised.

With Covid-19 disrupting the public markets, dealmakers have turned to the private ones.

Third quarter action in PIPEs set a historical record, outpacing that of previous periods in both deals and dollars, as it saw over 600 offerings and over $47 billion in capital potentially raised.

The recent quarter’s 618 PIPEs represent an 87.72% increase in the number of deals from the same quarter of 2019 and a 7.65% increase from the previous quarter. The $47.74 billion raised was an 82.24% increase from 2019’s third quarter and a 6.85% increase over $44.36 billion raised in the second quarter.

The increase in PIPEs was matched by the initial public offering market. Jefferies LLC equity strategist Steven DeSanctis noted a similar jump in IPOs, which over an annual September-to-September period grew over 60% in both transactional volume and capital raised.

DeSanctis views the situation as one of pent-up demand and increased biotech and healthcare investing, which drove the PIPEs market even harder than usual.

Lowenstein Sandler LLP partner John Hogoboom noted increased activity in PIPEs in general and PIPEs associated with SPAC acquisitions.

“Whichever segment of the market you want to look at, activity is clearly increasing. We’ve been busier during the pandemic than I would have ever thought possible.”

In the recent quarter, traditional unregistered PIPEs accounted for 332 of the transactions and $25.11 billion in capital, or 53.63% and 52.3% of their respective totals.

In the registered direct department, some 120 at-the market facilities were established with the potential to raise about $17 billion. Note that while ATMs can be tapped at the onset, they usually are not. Many are not used until later, or not used at all.

Registered directs raised about $6 billion in actual cash, mostly via common stock and debt issuances.

One area where deals pushed the market was PIPEs used as all or part of the financing for SPAC acquisitions. In the third quarter, such transactions accounted for over 16% of PIPE transactions and over 17% of the total capital raised.

Mayer Brown LLP partner Anna Pinedo also noted the increased activity in PIPEs from higher quality issuers and from SPAC acquisitions.

Pinedo said that sometimes PIPE agreements for SPAC transactions could take more time to obtain necessary warrants and representations from private companies being acquired. Parties who have not engaged in previous PIPE transactions may be less familiar with some of the typical features of PIPE subscription agreements.

Hogoboom also noted some differences between different types of PIPE transactions.

“In the SPAC space, the PIPE terms are incredibly issuer-favorable, reflecting the general investor frenzy over SPACs,” Hogoboom said.  “What we would consider ‘normal’ terms for a PIPE, such as liquidated damages for late registration statement filing or effectiveness, are unheard of in the SPAC space.”

He went on to comment on deal term differences. “Unfavorable economic terms and long lock-ups appear to be the order of the day in that market. In many cases, investors are being asked to commit to provide financing for a future acquisition that isn’t even on the horizon.”

Across all types of transactions for the quarter, one industry stood out.

Healthcare led the pack, as usual, with 47% of the deals and 33% of the capital.

Financial institutions were next, with 19% of the deals while technology accounted for 10% of total deals.

Industrials appeared to have a huge quarter, with $11.6 billion raised. However, $5 billion of that derives from an ATM set up by Tesla Inc. (TSLA).

Maxim Group LLC placed the largest number of deals, with eight, followed by Credit Suisse Group and Morgan Stanley (MS) with five each.

H.C. Wainwright & Co., Roth Capital Partners LLC and Special Equities Group LLC all placed three deals apiece.

PIPE data is provided by PrivateRaise, The Deal’s private placement data service. PrivateRaise tracks equity and equity-linked placements of $1 million or more by public companies raising capital in U.S. markets.

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