The 2023 Technology and Life Sciences PIPE and RDO Report presents analysis related to 177 private investments in public equity (PIPEs) and registered direct offerings (RDOs) by U.S.-based technology and life sciences companies between January 1 and December 31, 2023.
Market volatility, high interest rates, and ongoing geopolitical conflict in Ukraine and Israel continue to influence low levels of capital markets activity in the United States. While the third quarter of 2023 saw a boost with several high-profile technology companies completing their IPOs, it did not usher in a wave of other transactions. Many companies continue to opt for a “wait-and-see” approach. We expect that these market challenges will continue to complicate capital raises for the immediate future and companies may increasingly explore alternatives to traditional underwritten offerings as a way to meet their financing needs.
PIPEs and RDOs can be good alternatives to traditional underwritten offerings, particularly during periods of market volatility, because they can be negotiated discreetly and publicly announced after the parties agree to terms. However, given the lack of company leverage (usually) and near-term illiquidity of the securities sold, the cost of capital is typically higher for PIPEs than underwritten offerings. Because an investor receives freely tradable securities in an RDO, the securities are typically sold at a smaller discount to the current market price of the company’s common stock in an RDO than in a PIPE; in 2023, the average discount for PIPEs surveyed was 6.7 percent while the average discount for RDOs surveyed was 1.8 percent.
The second half of 2023 was marked by the following notable trends:
- Technology issuers are raising less money, and life sciences issuers are raising more.
- Full-ratchet conversion price adjustments are more common.
Read the 2023 Technology and Life Sciences PIPE and RDO Report.
