The Quality and Price of Investment Banks' Service: Evidence from the PIPE Market

We investigate the market structure and the pricing by placement agents of private investments in public equities (PIPEs). Our findings indicate that more reputable agents are associated with larger offers and with firms possessing lower risk. Agent reputation is positively associated with lower discounts and an enhanced post-PIPE trading environment. Issuers pay a higher dollar fee for these benefits, although more reputable agents charge a lower percentage fee. The evidence suggests that it is the quality of the issuing firm, and the pricing and reputational concern of the placement agent, that drives the equilibrium in the PIPE market.