The economics of PIPEs, revisited

Abstract This paper examines rent sharing in private investments public equity (PIPEs) between newly firms and investors. The evidence suggests highly asymmetric sharing. Newly earn a negative return of up to −15% the first post-PIPE year, while investors benefit due ability dictate transaction terms. results are economically relevant because are, at least recent years, more likely tap rather than markets for follow-on financing shortly after initial offering (IPO), contrast with those broad PIPE market Lim et al. (2021). study also contributes literature by an integrative view competing theories cross-section stock returns. We simultaneously test proxies corporate governance, information, bargaining power, managerial entrenchment. While all explanations have univariate predictive power performance, only governance information robust ceteris-paribus tests.