Ola Bengtsson is a Professor of Finance in the Department of Economics at the Lund University of Economics and Management in Lund, Sweden. Na Dai is an Associate Professor of Finance in the School of Business at the State University of New York at Albany in Albany, NY.
Financial Contracts in PIPE Offerings: The Role of Expert Placement Agents
Article first published online: 18 OCT 2014
© 2014 Financial Management Association International.
Volume 43, Issue 4, pages 795–832, Winter 2014
How to Cite
Bengtsson, O. and Dai, N. (2014), Financial Contracts in PIPE Offerings: The Role of Expert Placement Agents. Financial Management, 43: 795–832. doi: 10.1111/fima.12061
We appreciate the valuable comments from Raghu Rau (Editor) and an anonymous referee. The paper also benefits from comments from Heitor Almeida, Alex Borisov, Murillo Campello, seminar participants at the University of Illinois at Urbana-Champaign, SUNY at Albany, the 2011 Mid-Western Finance Association Annual Meeting, and the 2011 FMA Annual Meeting. Na Dai owes thanks to the Center for Institutional Investment Management (CIIM) at University at Albany for financial support. All remaining errors are our own.
- Issue published online: 18 NOV 2014
- Article first published online: 18 OCT 2014
- Accepted manuscript online: 1 MAY 2014 11:05AM EST
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.