PIPE Filters.Always worth a gander Gander, town (1991 pop. 10,339), NE Newfoundland, N.L., Canada. Gander's airport, an important base in World War II, is a hub for international flights; it also attracts many refugees. It was the site of a Dec. is Roy Weitz's fundalarm.com Web site, which monitors the mutual fund industry and recently looked at "PIPEs." The acronym acronym: see abbreviation. A word typically made up of the first letters of two or more words; for example, BASIC stands for "Beginners All purpose Symbolic Instruction Code. stands for "public issue of private equity." It seems that mutual funds are struggling to beat the averages. And that is important now m terms of marketing because even ordinary investors have become somewhat street-hip and want to invest in mutual funds that outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. market averages, not merely deliver good returns. But, of course, beating the market is no easy feat. Indeed, some highly respected market theologians -- such as famed Burton Malkiel (author of the classic, "A Random Walk Down Wall Street") -- contend that due to the "efficient market theory" and the inherent unpredictability of events (such as war, credit famine and fads), an investor can have the same chance of success by throwing darts at a board as hiring an expensive money manager. That being the case, money managers are under greater pressure to show they are worth their salaries and nice offices. So, in a PIPE deal, mutual fund titans agree to buy large blocks of stock from a single company, but at a below-market price. "In one recent PIPE deal involving shares of NPS NPS National Park Service NPS Naval Postgraduate School NPS Net Promoter Score (customer management) NPS Non-Point Source pollution NPS Native Plant Society NPS Norfolk Public Schools (Virginia) Pharmaceuticals, four (mutual) funds[ldots] picked up shares at $12 each. At the time, NPS stock was selling for about $16 on the open market," said Weitz. In another recent PIPE deal, Janus (a mutual fund) picked up almost $1 billion of Healtheon/WebMD Inc. shares at about a 7 percent discount to market, said Weitz. For issuers, a PIPE deal cuts underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. costs and raises a slug of cash in a quick-step; for buyers, it's a chance to buy at as much as a 25 percent discount to market. There are risks, of course. Often companies wanting cash in a hurry are in a growth mode, which is great if they can sustain growth and reward shareholders. If they can't, fund managers may find that they have a nice fat stake in a company that needed cash, used it up and diluted its shareholders in the process. Contributing columnist Benjamin Mark Cole Mark Cole is a multi-instrumentalist blues and roots musician based in Gloucester, UK Music Mark primarily writes and performs blues music but also writes and performs music influenced by other American roots music genres such as americana, cajun, zydeco, bluegrass and writes about the local investment community for Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. Business Journal. He can be reached at sevencontinents@mindspring.com |
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