Google Capital recently implemented a new PIPE (private investment in public equity) to provide more than $46 million in investment capital to Care.com (CRCM).

The investment sent the share price soaring, nearly doubling Care.com’s market capitalization, while also making Google the largest single shareholder.

Private investments in public equity work just like the language says. An institutional investor, high net worth individual, pension fund, corporation, family trust, etc. puts up a large, pre-determined sum of money for a pool of securities (common shares, options, warrants, etc.) at a discount to the current share price. The shares are restricted, meaning they cannot be sold into the open market, for one year, or until the registration statement for said shares is declared ‘effective’ via a filing by the company to the Securities and Exchange Commission (SEC).

Once a PIPE deal was announced, a new tranche was needed, terms of the agreement changed (i.e. adjustment in pricing or adding warrants and option), or investors started selling their shares, real-time alerts are issued to customers confirmed by public SEC and SEDAR (Canada) filings.

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