Abstract
This study investigates the price pressure around the transactions of private equity to see if there is a motivation for specific investors to gain more discounts preceding the closing date or to hedge the underlying shares after the closing date. In general, hedge funds are the most important participants in the private equity market. Even though these issuing companies financed from hedge funds are underperformed, hedge funds still could make profits from these transactions. To analyze why this result happened, the study examines whether private placements investors would short-sell the shares to decline the cost or to hedge their position to ensure the positive profits. Finally, we calculate the calendar time abnormal returns to private placements investors to explain the motivation that investors participate in the private placements.