On the other hand, investors can sell their shares in a short period of time, which lowers the market price. If the market price falls below a fixed threshold, the entity may be obliged to issue additional shares at a significantly reduced price. This new share issue reduces the value of the shareholders` investment, which can lead to a decline in the share price. The acceleration of the credit crisis in September 2008 allowed companies that would otherwise not be able to access government procurement to quickly access capital at reasonable transaction costs. In recent times, many hedge funds have turned away from investing in limited illiquid investments. Some investors, including Warren Buffett, found PIPs attractive because they could buy shares or securities linked to shares at a discount on the public market price and because they had given an investor the opportunity to acquire an important position at a fixed or variable price instead of driving up a stock`s price through his own open purchases on the market. The SEC has sued some PIPE investments (mainly hedge funds) in violation of U.S. securities laws. The controversy has largely focused on hedge funds that use PIPE securities to cover the shares that the fund has defiled in anticipation of PIPE`s offer.
In these cases, the SEC showed that the fund was aware of the impending offer (in which it would participate) before taking over the shares.  A private investment in public equity, often referred to as PIPE, involves the sale of publicly traded common shares or a form of preferred shares or convertible bonds to private investors. This is an auction of shares of a limited company that is not done by a stock market offer. PIPE agreements are part of the primary market. In the United States, an offer of PIPE with the Securities and Exchange Commission may be registered on a registration statement or closed as an unregistered private placement. According to U.S. market research, 980 transactions were completed in the nine months following September 30, 2008, for a total gross proceeds of $88.3 billion, putting the market on track for another record year.  This is a comparison with 1,106 such agreements in 2000, which raised US$24.3 billion and 1,301 PIPE agreements in the United States and raised a total of $20 billion in 2005. In recent years, Wall Street`s major investment banks have increasingly invested as investment agents in the PIPE market. Private investments in public equity (PIPE) are the purchase of shares listed at a price below the current market value (CMV) per share. This method of purchase is a practice of investment firms, investment funds and other large accredited investors.
A traditional PIPE is one in which common or preferred shares are issued at a certain price to the investor, while a structured PIPE issues common or preferred shares of convertible bonds.