The influence of investor identity and contract terms on firm value: Evidence from PIPEs

Billett, Matthew T.; Elkamhi, Redouane; Floros, Ioannis V.

doi:10.1016/j.jfi.2014.11.003

Cited by 34 publications

(6 citation statements)

References 23 publications

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“…Somewhat more unique to this sample is the rate of board representation. In 15% of deals, VC investors obtain board representation as part of the deal, whereas Billett, Elkamhi, and Floros (2015) document that such terms are rare among PIPEs more generally. Finally, the use of proceeds is most frequently listed as working capital (53%), followed by funding a specific project (37%).…”

Section: Data and Descriptive Statisticsmentioning

confidence: 99%

Venturing beyond the IPO: Financing of Newly Public Firms by Venture Capitalists

Iliev¹,

Lowry

2020

The Journal of Finance

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Contrary to conventional wisdom, we document that approximately 15% of venture capitalist (VC)-backed firms raise additional capital from VCs in the five years after going public. We propose two explanations for why firms revert to VC financing post-IPO (initial public offering). First, we hypothesize that VC participation in post-IPO financing represents an efficient solution to informational problems that would otherwise constrain firms' abilities to exploit value-increasing investments. Analyses of firm and VC characteristics, together with the finding that these investments are value-increasing for both VCs and the underlying companies, support this hypothesis. We find no support for the alternative that agency conflicts motivate these investments. * Peter Iliev is with Pennsylvania State University. Michelle Lowry is with Drexel University.

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Section: Data and Descriptive Statisticsmentioning

confidence: 99%

Venturing beyond the IPO: Financing of Newly Public Firms by Venture Capitalists

Iliev¹,

Lowry

2020

The Journal of Finance

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“…Brophy et al (2009) show that firms issuing structured PIPEs to hedge funds perform worse compared to those issued by other investor types or to traditional PIPEs. Billett et al (2015) also report that contract terms impact PIPEs' wealth effects conditional on investors' identity.…”

Section: 1 Regulatory Framework Of Private Investments In Public Equitymentioning

confidence: 99%

“…The second channel we assess is the certification channel. Strategic investors can provide a certification effect due to their likely long-term and strategic relationship with firms in which they invest (Billett et al, 2015). Therefore, we examine the level of strategic holdings to test the certification channel.…”

Section: Introductionmentioning

confidence: 99%

A Global Analysis of Private Investments in Public Equity

Andriosopoulos

Panetsidou

2018

SSRN Journal

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“…In a similar vein, Wruck and Wu (2009) find that PIPEs that do not form new governance-improving relationship entail lower stock returns. In line with the overall argument, a number of studies document that issuing entrepreneurs that resort to hedge funds experience the poorest post-PIPE stock performance (Dai 2007;Brophy et al 2009;Billett et al 2015;Lim et al 2021).…”

Section: Main Hypotheses: Entrepreneur and Investor Returnsmentioning

confidence: 78%

The economics of PIPEs, revisited

Momtaz

2022

Small Bus Econ

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This paper examines rent sharing in private investments in public equity (PIPEs) between newly public firms and private investors. The evidence suggests highly asymmetric rent sharing. Newly public firms earn a negative return of up to −15% in the first post-PIPE year, while investors benefit due to the ability to dictate transaction terms. The results are economically relevant because newly public firms are, at least in recent years, more likely to tap private rather than public markets for follow-on financing shortly after the initial public offering (IPO), and because the results for newly public firms contrast with those for the broad PIPE market in Lim et al. (2021). The study also contributes to the PIPE literature by offering an integrative view of competing theories of the cross-section of post-PIPE stock returns. We simultaneously test proxies for corporate governance, asymmetric information, bargaining power, and managerial entrenchment. While all explanations have univariate predictive power for the post-PIPE performance, only the proxies for corporate governance and asymmetric information are robust in ceteris-paribus tests.

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The influence of investor identity and contract terms on firm value: Evidence from PIPEs

Cited by 34 publications

References 23 publications

Venturing beyond the IPO: Financing of Newly Public Firms by Venture Capitalists

Venturing beyond the IPO: Financing of Newly Public Firms by Venture Capitalists

A Global Analysis of Private Investments in Public Equity

The economics of PIPEs, revisited

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