Private Investment in Public Equity - PIPE

See: Private Investment Fund.

It's caled a PIPE. And a lotta people smoke it.

You put mayonnaise on everything. You spread it on your bagel in the morning (you think people who use cream cheese are gross). You put it on salads. You like to snuggle on the couch at night and just eat mayo out of the jar with a spoon while binging Netflix. When you go to your local grocery store to buy mayo, you don't just pick up a jar at a time. You buy it in bulk. Instead of spending $0.40 an ounce by purchasing the little jars, you end up paying just $0.25 an ounce by getting the giant pack...the one where they need to get the forklift ready to help you take it to the car.

Bottom line: when you buy things in bulk, you get a discount off the publicly advertised price. That's the basic dynamic behind a PIPE.

It works like this: you have an already-trading public company. Shares change hands on the NYSE or NASDAQ everyday. But then a private investment firm wants to buy some shares. A lot of shares. Meanwhile, the public company wants to sell shares. Remember: the stock that trades on a public exchange was sold by the company a long time ago. The firm itself doesn't see any money from the deals that go down on the NYSE or NASDAQ. If the firm wants to raise more cash, money it can use to invest in its business, it needs to sell more stock. That usually involves a secondary offering, which can be a hassle. However, if it sells a big chunk of stock in one shot to a private investor, it saves a lot of trouble. It gets an inflow of cash, and the private investor gets the shares they want. In exchange, the public company offers the investor a deal. It sells the shares below the current market value. The big investor gets the stock at a price less than they'd have to pay if they bought it in the public market. Basically, they receive bulk pricing. And the company gets an injection of cash, which it wouldn't get if the investor had purchased the shares on the open market.