Google Capital Bringing Back the 'PIPE' Throwback

Bolton Flautt  |

Fashion trends are easy to predict. All you do is check Twitter (TWTR) for what styles Katy Perry, Kanye, or Kim Kardashian are sporting these days and there is your shopping list. Celebrities establish the trend and then the rest of us follow suit. In business, Google, Amazon, and Facebook are our celebrities so, we always watch what they are doing with a keen eye and then do our best to jump on the bandwagon as soon as possible. Most recently, Google Capital decided to bring back an old friend of mine called a PIPE (private investment in public equity) to provide more than $46 million in investment capital to Care.com (CRCM). The investment sent the share price soaring, nearly doubling Care.com’s market capitalization, while also making Google the largest single shareholder.

Much like many of the NFL and NBA teams are bringing back the ‘throwback’ jerseys to increase merchandise revenue, Google has put its stamp of approval on a once popular financing vehicle. Companies are always looking for new, and old, ways to raise capital, so this could very well be a sign of things to come – in such case, there will be a need to have a real-time tracking system for following the life cycle of said PIPE deals.

Private investments in public equity work just like the language says. An institutional investor, high net worth individual, pension fund, corporation, family trust, etc. puts up a large, pre-determined sum of money for a pool of securities (common shares, options, warrants, etc.) at a discount to the current share price. The shares are restricted, meaning they cannot be sold into the open market, for one year, or until the registration statement for said shares is declared ‘effective’ via a filing by the company to the Securities and Exchange Commission (SEC).

Back during my days at Knobias, I helped develop and run our PIPEtrac database of more than 10,000 PIPE deals. I followed PIPE deals from their inception until the registration statements became effective, allowing for investors to sell their securities obtained at a significant discount to the share price at the time of the announcement. Once a PIPE deal was announced, a new tranche was needed, terms of the agreement changed (i.e. adjustment in pricing or adding warrants and option), or investors started selling their shares, I would issue real-time alerts to customers confirmed by public SEC and SEDAR (Canada) filings.

The value of a product like this would be noteworthy considering all the advantages of having real time knowledge of the details of which big time players have put up significant capital in certain high potential growth companies. Knowing whom these investors are; how much they invested in these capital hungry micro, small, and mid cap. companies; what they received for the investment; and, most importantly, when they can and do sell said securities would be very valuable public information.

I can see us at Equities.com developing a similar PIPE monitoring product in the future should the need arise, and from the new ‘shoes’ Google Capital is wearing, I believe that ‘trend’ is coming soon to an investment bank and media outlet near you…

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
TWTR Twitter Inc. 36.77 -0.89 -2.36 10,842,400 Trade
GOOG Alphabet Inc. 1,130.10 -16.23 -1.42 1,647,245 Trade
CRCM Care.com Inc. 10.72 0.09 0.85 623,330 Trade

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