LEAKS AND TAKEOVERS

A Beginner’s Guide to Private Investment in Public equity(PIPEs)-PART(3/3)

Programming Note : We will complete the guide to PIPEs by looking at sample deals.

SAMPLE PIPE DEALS

Case Study 1: Berkshire Hathaway’s $5B investment in Goldman Sachs.

Background: This was during the 2008 financial crisis when Warren Buffet’s Berkshire Hathaway helped provide much needed liquidity to Goldman.

Securities issued: $5B worth of perpetual preferred shares (with annual dividends of 10%) + $5B worth of warrants at a strike price of $115 (exercisable within a 5-year period. Buffet and Berkshire later converted the warrants to common stock).

Amount raised: $5B (Don’t get confused. The $5B worth of warrants were included in the deal for the perpetual preferred shares)

Price: $123/share (for the perpetual preferred shares)

Placement agent: Probably Berkshire itself.

PIPE Investor: Berkshire Hathaway

Case Study 2: $32M Javelin Pharmaceutical PIPE.

Background: Javelin is a small drug company in Massachusetts.

Securities issued: 14.2M shares of Common stock + warrants

Amounts raised: $32M (actually $31.95M)

Price: $2.25/ (share + warrant)

Placement Agent(s): 1. Rodman & Renshaw 2. Riverbank Capital Securities

PIPE Investor(s): 1. NGN Capital, a venture capital firm 2. Wexford Capital, a hedge fund and private equity firm.

Case Study 3: €10M Biophytis SA PIPE transaction.

Background: Biophytis is a pharma company specializing in developing drugs for aging related diseases.

Amount raised: €10M

Price: €0.47/share (at a 20% discount to share piece)

Securities issued: 21.2M shares of common stock.

Dilution: investors who previously owned 1% of the stock will now own 0.77% of the stock.

Placement agents: H.C. Wainwright & Co., LLC (for US institutional investors) and Invest Securities (European Institutional Investors).

PIPE investors: sundry institutional investors in the US & Europe.

Case Study 4: Bio-Key International, Inc. $2.1M Pipe.

Background: Bio-Key is a provider of biometric and security authentication solutions.

Amount raised: $2.1M

Securities issued: Convertible debt (convertible to common stock at $1.16/share) + 5-year warrant to purchase 1.9M of common stock at an exercise price of $1.16/share.

Pipe Investor: Lind Global Macro Fund, LP

Placement agent: Maxim Group, LLC.