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Matt Levine

The Trump SPAC PIPE Is Free Money

Also Peloton and a Bored Ape fat finger.

We talked last week about the Trump SPAC PIPE. A quick recap: Donald Trump has a vague sketch of a media company called Trump Media & Technology Group (TMTG). TMTG is a private company and there is almost no public information about its business, finances, executives, etc. In October, TMTG announced a merger with a special purpose acquisition company (SPAC) called Digital World Acquisition Corp. (DWAC), which will contribute about $293 million of cash to TMTG in exchange for TMTG stock. DWAC is currently a public company; it raised stock from the public by selling shares at $10 each, and upon the announcement of the TMTG deal its stock shot up. It closed at $56.02 on Friday.

Traditionally SPAC deals are accompanied by private investments in public equity (PIPEs), in which big institutional investors agree to buy stock in the combined company at the time of the SPAC merger. Often the PIPE investors invest on the same terms as the SPAC investors, buying stock in the new company at $10 per share, but where (as here) the stock is up a lot in anticipation of the merger, the PIPE investors might agree to a higher price.