Shareholder litigation and short selling ahead of private equity placements

We examine the impact of shareholder litigation on short selling ahead private investments in public equity (PIPEs). find that PIPE issuers incurred securities class action lawsuits prior to are shorted more heavily issue. The case status at date, severity lawsuit, and timing placement after event also affect extent activity PIPEs. Consistent with hedging incentives, effects pronounced PIPEs where lead investors hedge funds traditional