Hacker News Reader

Comment by sdan | Hacker News Reader

TLDR: You need PIPE investors. Though with the recent correction, its harder to get, so it seems SPACs are trying to find companies they can merge w/o the need for PIPE to fill the rest.

Lucid Motors at one point was valued at 70b without a single car on the road. And although Churchhill Capital 4 raised 1b, $24 billion was filled by PIPE investors iirc.

View on HN

What are PIPE investors? Do they get favourable terms?

Private investment in public equity. Generally, yes, but it's negotiated arm's length yet opaque; in addition there's various consideration to the legality/optics/consequences of selling a (large) stake at a (material) discount to current market spot rates.

I think it is important to note that PIPE investors will always purchase SPACs at NAV (usually $10) with only very rare exceptions. NAV is where most of the SPACs are currently trading due to the recent pullback. Therefore, it is only more favourable when the SPAC is trading above NAV, and this is extremely uncommon [1].

[1] - https://spactrack.net/activespacs/ (filter by price and see how many are trading above $10 and below $10).

That is why it is especially disgusting when fake populist SPAC sponsors (looking at you Chamath) pretend to be on the side of retail as they give handouts to their Wall Street lords.

As the article says, that's reminiscent of how bad old IPO allocations work.

Reply on news.ycombinator.com