Faculty
Social Science
Supervisor Name
Dr. Yini Liu
Keywords
PIPEs, pricing effects, innovation, corporate finance
Description
We propose a research project examining the effect of firms’ innovation performance in the pricing of private equity placements, namely private investments in public equity (PIPEs). We investigate whether firms’ previous innovation outputs have been considered in the PIPE issuance. Innovative activities are important for firms to gain strategic advantage against their competitors. Firms with innovative opportunities frequently lack capital. However, financing innovation tends to be more difficult due to the uncertainty and information asymmetry (Acharya and Xu, 2017). Compared to public firms, private firms have the limitations to access the broader investor pool and higher cost of capital. Unlike public equity offerings, private equity placements may allow issuers to be more flexible in communicating the prospects of investments and negotiating terms with major investors while maintaining the confidentiality of the most important strategic information.
Acknowledgements
Thank you to Dr. Yini Liu, the Western USRI program, and the Faculty of Social Science for their support.
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial 4.0 License
Document Type
Paper
Included in
Business Administration, Management, and Operations Commons, Business Analytics Commons, Corporate Finance Commons
The effect of innovation performance on the pricing in private placement
We propose a research project examining the effect of firms’ innovation performance in the pricing of private equity placements, namely private investments in public equity (PIPEs). We investigate whether firms’ previous innovation outputs have been considered in the PIPE issuance. Innovative activities are important for firms to gain strategic advantage against their competitors. Firms with innovative opportunities frequently lack capital. However, financing innovation tends to be more difficult due to the uncertainty and information asymmetry (Acharya and Xu, 2017). Compared to public firms, private firms have the limitations to access the broader investor pool and higher cost of capital. Unlike public equity offerings, private equity placements may allow issuers to be more flexible in communicating the prospects of investments and negotiating terms with major investors while maintaining the confidentiality of the most important strategic information.