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Series 79 practice questionmediumPIPE Transactions

What is a 'registered direct offering' and how does it differ from a traditional PIPE?

  1. AA registered direct offering sells shares to retail investors through a public auction
  2. BA registered direct offering is identical to a traditional PIPE in all respects
  3. CA registered direct offering sells shares directly off an existing shelf registration statement to select investors, eliminating the need for a separate resale registration✓ Correct answer
  4. DA registered direct offering requires SEC pre-approval of each investor
Explanation

Why C — A registered direct offering sells shares directly off an existing shelf registration statement to select investors, eliminating the need for a separate resale registration

A registered direct offering is a hybrid between a traditional PIPE and a public offering. The issuer sells shares directly to select investors using an existing shelf registration statement (typically on Form S-3), meaning the shares are registered at the time of sale and are immediately freely tradable. This eliminates the need for subsequent resale registration and the associated costs and risks. Registered directs are often preferred by investors because they receive freely tradable shares, and by issuers because the discount from market price is typically smaller than in a traditional PIPE.

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