Corey Ribotsky – NIR Group

According to Corey Ribotsky, the General Motors Corporation bailout bears an uncanny resemblance to a traditional PIPE transaction. To prove this point Ribotsky first explains what a PIPE transaction is.

A Private Investment in a Public Equity (PIPE) is a special transaction in which investors that are accredited purchase stock in a company for a price that has been predetermined in advance. The stock must be registered with the SEC (Securities and Exchange Commission) so that the stock can be resold sometime in the future. There can be additional aspects to the PIPE transaction as well, such as including a coupon rate if there is debt associated with the transaction or including a detached option or warrant package.

Ribotsky goes on to explain that even before the long predicted bankruptcy of G.M. the U.S. government had invested $19.4 billion in a structure which already had the look and feel of a typical PIPE deal. This move by the U.S. government gave important legitimacy to this particular type of investment structure and certainly validates it as a mainstream form of financing.