A Pipeline to Bargain Deals

摘要

Suppose you're an in-vestor who could persuade a company to sell you shares of its stock for less than the last price on NASDAQ or the Big Board. Wouldn't that give you an edge up on the public investor? Well, that's precisely what a group of hedge funds did in January with modem maker Novatel Wireless. By negotiating a private transaction with the San Diego company, fund firms such as Omicron Capital and Vertical Ventures were able to buy shares at $7 when they were trading for $9 on NASDAQ. Recently shares were $21―a robust 133% gain for the regular investor, but an even sweeter 200% for the hedge funds that still hold the shares. Such bargain-price deals―known as Private Investments in Public Equity (PIPEs)―are becoming popular among sophisticated investors. Some hedge funds specialize in these deals, but PIPEs have also attracted buyers such as Berkshire Hathawa's Warren Buffett and mutual-fund manager Bill Miller of Legg Mason Value Trust. Most of the companies are not household names. They include SuperGen, a biotech firm, American Water Star, which makes flavored-water drinks, and Empire Resorts, which operates a race track in Monticello, N.Y., and hopes to build a casino and resort nearby.