The PIPEs Report - October 15, 2005

Market Rebounds After Unusually Active Summer

After a sluggish second quarter, PIPE market activity set a record in the summer months, a season that’s historically associated with light deal-making. Investors and issuers completed an average of 136 deals a month in the third quarter compared with an average of 121 a month in the previous quarter. Most surprising, some 145 PIPEs closed in August, which was the second busiest month of the year after March’s 169 deals and by far the busiest August on record, according to PrivateRaise, which tracks private financings of more than $1 million dating to 2001. Full Story

Refco Debt Reportedly Secured by PIPE Shares

A recent flurry of legal activity by regulators and issuers’ counsel has again shown the spotlight on the issue of short sale fraud by hedge funds active in PIPE investments. Nothing is bigger than the legal troubles that are now swirling around Refco. As previously reported in TPR, (“Short Sale Inquiry Snags Prime Broker, More Funds,” June 1, 2005) Refco Securities announced in May that it had received a Wells notice from the Securities and Exchange Commission regarding short selling of Sedona Corporation stock. The announcement of the investigation was made in the company’s S-1 filing for its August IPO. Full Story

Restricted Stock Partners Seeks to Mine Untapped Market

Restricted Stock Partners is hoping to provide more liquidity and options to restricted securities holders, and PIPE fund managers may become the company’s biggest fans. Last week RSP officially launched its Restricted Stock Trading Network, in which the company will facilitate trades of restricted securities of public companies. Ultimately, RSP aims to tap into a potentially deep and lucrative market: The Depository Trust and Clearing Corp. estimates that restricted securities, which include restricted stock, warrants and debt, comprise a $1.2 trillion asset class. Full Story

• Insurance Company PXRE Raises $375M in Biggest PIPE in Months
• CepTor Settles Xmark Suit, Secures $20M Equity Line
• Micro Caps Expect No Drop in SOX Costs
• Fountainhead Partners Reach Settlement with SEC
• L-1 to Invest $100M for Controlling Stake in Viisage
• Investors Not Swayed by Hedge Registration
• Essex, Frazier Leading $66M Investment in La Jolla Pharmaceutical
• Can the SEC Manage Hedge Registration?
• New Advocate for Small Firms
• Events
• Hirings & Firings

PIPE funds saw strong improvement during the month of September, as did overall hedge fund returns, which, kept afloat by gains in health care, utilities and energy, continued to eek out positive returns. The average return of PIPE funds reporting data to TPR for September was 1.47%, up almost 120% compared to August’s average return of 0.67%. Full Story