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Premium PIPEs: Why Do Investors Pay More than the Market Price?

December 1, 2023 @ 10:30 am - 12:00 pm CST

Part of the Lubar Research Seminar Series

Speaker: Yianni Floros, University of Wisconsin Milwaukee        

Private investments in public equity (PIPEs) are frequently issued at a price above the prevailing market price. Although the prior literature largely ignores premium PIPEs, they constitute 24.5% of common stock PIPE issuances and are prevalent across time, issuer industry, and investor type. Neither offer size nor issuer liquidity explains premium PIPEs. Average abnormal announcement returns are 9.4% greater for premium PIPEs than discount PIPEs. Long-term returns are also significantly higher for premium PIPEs. We find investors’ willingness to pay a premium certifies issuer undervaluation resulting from either private information or evolving strategic/monitoring relationships. Our results are not consistent with investors paying a premium in return for contractual features subsequently used to extract value from issuers, such as warrants or board seats. In premium PIPEs, undervalued firms issue shares instead of repurchasing shares.



December 1, 2023
10:30 am - 12:00 pm CST
Event Category:


Lubar Hall, N440
3202 N. Maryland Ave.
Milwaukee, WI 53201 United States