Perspective – Negotiating PIPE Transactions in Canada
BENEFITS OF PIPE TRANSACTIONS
For some issuers, a PIPE transaction may be the only economical option available to raise capital. For other issuers, a PIPE transaction may be an attractive alternative to public offerings as they offer increased speed and potentially lower costs as typically no disclosure document is prepared and there is no (or little) involvement of any Canadian securities commission. In addition, through a PIPE transaction, an issuer may be able to develop a long term and/or strategic relationship with a large shareholder. Finally, depending on its bargaining power, the issuer may be able to negotiate certain protections such as hold
periods and/or standstills.
PIPE transactions can present an attractive opportunity for investors as they are usually offered at a discount to the market price and typically include some additional rights or protections, such as board seats, pre-emptive rights, registration rights, anti-dilution protection or veto rights.