That rumor is news to me...but if its news about getting funded for their technology that would be good news as long as its not death spiral funding...
Letters to the Editor Financial Times letters.editor@ft.com Sir,
Jason Huemer's “Hedge Row” column (The heat is on for funds' Pipe strategy, March 15), while having elements of accuracy in describing the past practices of a few institutions in the PIPE market, misrepresents the purpose and nature of PIPE financings. Moreover, the article inappropriately links BayStar to the abusive financing practices referenced by Mr. Huemer. Our funds have never taken part in toxic or death spiral convertible financings of any sort.
PIPEs, or Private Investments in Public Equities, are a legitimate and important financing tool for small and mid-cap publicly traded companies to raise capital more efficiently than with a traditional secondary stock offering. Furthermore, relative to the traditional secondary offering, these types of financings are often completed with less downward pressure on the stock price, less resulting dilution for common shareholders and meaningfully less use of management time and resources.
Mr. Huemer accurately describes a number of transactions completed a few years ago in which companies issued a form of convertible bonds with a resetting conversion price granting more stock to the investor as the stock price declined. The problems were caused not by the PIPE itself, but rather by the unusual reset provision, which led to massive short-selling when the stock price began to fall. These types of transactions are quite uncommon today, with simple issuances of common stock being today's overwhelming favorite transaction structure.
The BayStar Capital II Funds have never structured a PIPE with the onerous reset features described by Mr. Huemer – our firm specifically rejects that structure. In all its investments, BayStar works to be a partner with the Issuer and uses the BayStar funds to allow the Issuer to achieve its operational goals.
Linking BayStar to the practices described by Mr. Huemer is not supported by the facts and regrettably undermines the many strong partnerships BayStar has fostered with Issuers.
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