Squeezing the PIPEs

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The SEC has found another way to clamp down, but hedge funds are innovating around it

When the U.S. Securities and Exchange Commission began to delay registration approvals last spring for small issuers of private investments in public equity, or PIPEs, it wasn't just microcap companies that felt the pinch. The move has also hit hedge funds in significant ways.

First of all, hedge funds, which account for nearly 80% of the investors in PIPEs issued by microcap companies, got stuck holding a bag of orphaned - or unregistered - securities. That has sent a chill through the small end of the market, as has the real stunner - the