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Financial Contracts in PIPE Offerings: The Role of Expert Placement Agents

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  • Ola Bengtsson
  • Na Dai

Abstract

type="main"> We examine how Private Investment in Public Equity (PIPE) contracts allocate contingent cash flow rights between investors and issuers and the role of placement agents in PIPE contract design. Issuers advised by expert agents agree to more investor-friendly terms than issuers advised by nonexpert agents. Expert agents appear to help issuers understand the payoff consequences of negotiable terms. Moreover, expert agents allow issuers to negotiate more attractive pricing when they agree to investor-friendly terms. Issuers earn higher postoffering stock returns when they use expert agents or agree to more investor-friendly terms. These results suggest that the involvement of expert agents is beneficial to PIPE issuers.

Suggested Citation

  • Ola Bengtsson & Na Dai, 2014. "Financial Contracts in PIPE Offerings: The Role of Expert Placement Agents," Financial Management, Financial Management Association International, vol. 43(4), pages 795-832, December.
  • Handle: RePEc:bla:finmgt:v:43:y:2014:i:4:p:795-832
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    Cited by:

    1. Bengtsson, Ola & Dai, Na & Henson, Clifford, 2014. "SEC enforcement in the PIPE market: Actions and consequences," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 213-231.
    2. Dai, Na, 2011. "Monitoring via staging: Evidence from Private investments in public equity," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3417-3431.
    3. repec:eee:corfin:v:45:y:2017:i:c:p:64-83 is not listed on IDEAS

    More about this item

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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