Quick Answer
A primary offering sells newly issued securities with proceeds going to the issuer. A private placement is a primary offering exempt from Securities Act registration, made without the public registration process. A private investment in public equity (PIPE) is a private placement sold by an issuer that already reports publicly under the Exchange Act.
A PIPE issuer's existing public reporting is what separates it from every other private placement in this unit: its investors are buying into a company that already discloses, not one built from scratch.
What Is a Primary Offering?
A primary offering is a sale of newly issued securities by the issuer, with the proceeds going to the issuer. It stands opposite a resale by an existing holder, where the issuer receives nothing from the transaction.
What Is a Private Placement?
A private placement is an offering exempt from Securities Act registration, typically under the private-placement exemption or a Regulation D safe harbor, made without the registered public offering process the registration requirement otherwise demands.
What Is a Private Investment in Public Equity (PIPE)?
A private investment in public equity (PIPE) is a private placement made by an issuer that is already a reporting company under the Exchange Act. Unlike a start-up's private placement, a PIPE issuer already has ongoing public disclosure in place before the offering begins.
- PIPE securities are commonly common or preferred stock, or a convertible security
- Sold to a small group of institutional investors
- Often priced at a discount to the current market price
Exam Tip: Gotchas
- "Primary offering" is not the same as "registered offering." A PIPE is a primary offering of newly issued securities, but it is exempt, not registered. The "public" in PIPE describes the issuer's existing reporting status, not a public sale of the PIPE securities themselves.
What Should You Check on Exam Day?
- Confirm whether proceeds go to the issuer (primary) or to a selling shareholder (secondary) before calling an offering primary.
- Check whether an offering is registered or exempt; a private placement is always exempt, never registered.
- Remember that a PIPE issuer is already a reporting company before its private placement begins, which is what makes it different from a typical start-up private placement.