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PIPE hedge funds form trade group to combat image woes

Date: Tuesday, May 19, 2009
Author: Wall Street Journal

Companies that make private investments in public equities, also known as PIPE investments, have formed a trade group to educate the public about what they do. The Direct Funding Preservation Alliance will attempt to squelch misconceptions of PIPE investors, who have been criticized as predatory investors who take advantage of companies desperate for money. Membership will include PIPE investors and industry vendors, organizers say.

Even within the publicly maligned hedge-fund industry, PIPE funds have been looked at by some as a seedy back-alley fraternity. In some high-profile cases earlier this decade, PIPE investors were found by the Securities and Exchange Commission to have hedged their private placements by shorting the shares of companies in which they received discounted stock, further soiling the industry's credibility.