Eleazer Klein

PIPEsCurrent Issues ― A Legal And Regulatory Overview

What Is A PIPE?

“Private Investment in Public Equity”

Marketplace Includes:

– PIPE Structures

– Registered Directs

– Equity Lines

– SPACs

– High Yield Style Deals

PIPE Structures

• Common Stock

• Convertible Preferred

• Convertible Debt

• Warrants

• 144A

Typical Deal Timeline

ContactEffectiveness of Registration Statement

Term Sheet Signing Closing

Negotiation Registration

Filing of Registration Statement

Legal Hot Buttons

• Material Non-Public Information– Pre-Transaction– Post-Transaction

• Hedging Strategies– Pre-Closing– Pre-Borrow / “Icing”– Post-Closing

• Trading Limitations– Affiliates– Board Seats

• Section 13– 5% Reporting Threshold– Passive (13G) vs. Active (13D) Status

• Section 16– 10% Reporting Threshold

Regulatory Issues

• Stock Market Regulation– Discounted Issuance (20%) Rules

• Tax Considerations– FIRPTA

– Real Estate Holding Company

– Withholding / Tax Gross Up

• Hart-Scott-Rodino– $ 56.7 Million Threshold

– Passive Investor Exemption for <10% Holder

• Security Interests