PIPE Funds and Portfolio Valuation

Hedge funds are estimated to buy nearly 80 percent of the securities issued in PIPEs.  And many of these securities are bought by PIPE funds or specialized hedge funds that invest in restricted securities. 

Such securities are often bought with the expectation of having a registration available to allow resale in three to six months after the PIPE.  In the meantime, some – but not all – funds hedge their positions through short selling.  Whether or not such positions are hedged, each position is typically accounted for at “fair value,” which is defined by ASC 820 (FAS 157).

Pluris Valuation Advisors provides PIPE portfolio valuation services for numerous hedge funds, covering thousands of securities.  For more on our Portfolio Valuation services, click here.  Pluris provides valuations of restricted stock, warrants, convertibles, SPAC securities, and virtually all equity or equity-linked restricted securities commonly issued.  Our portfolio valuations are typically provided in one of two reporting formats:

Level II Reports

Valuations under our Level II format provide a separate report for each position.  These reports, which include an opinion letter, narrative on our valuation methods and the securities valued, and supporting exhibits, are also backed by more due diligence on the position, including document review.  These reports tend to be more appropriate for certain very large positions within a portfolio or for larger hedge funds with a sideline in PIPEs.

Level I Reports

Our Level I format reports provide a summary exhibit with a listing of each position, the information relied on for each valuation and the indicated value for each position, plus the total Indicated Portfolio Value.  These valuations typically never include document review and rely substantially on data from management on the securities valued.  These reports are relatively inexpensive, depending on the number of securities in the portfolio, and are most appropriate for portfolios with a large number of securities in them.  Most of our PIPE fund clients use our Level I valuation report format.

For more information on our PIPE security valuations, contact Pluris today.