Advantages of SPACs Over Traditional IPOs
PIPE Transaction
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While the SPAC and the Target prepare and negotiate the merger agreement, the SPAC and Target will also
begin a fundraising process to fund a portion of the merger consideration and the cash available to the Target
after the de-SPAC transaction.
PIPE in a nutshell: a private placement by a public company exempt from registration.
The SPAC and the Target will work with their financial advisors, often including a placement agent engaged by
the SPAC, to prepare an investor presentation. The investor presentation will be presented to institutional
accredited investors who agree to maintain the confidentiality of the information and express interest in
investing in the SPAC in a PIPE transaction. The terms of the confidentiality agreement will require that the
investor presentation be disclosed publicly, concurrently with the announcement of the signing of the merger
agreement, in order to "cleanse" the PIPE investors from possession of material nonpublic information and
enable them to trade SPAC securities.
This investor presentation is similar to an IPO roadshow presentation and contains information about the Target's business and
the terms of the transaction, but, unlike an IPO roadshow presentation, it often also includes financial projections.
The PIPE investors and the SPAC will enter into a subscription agreement for the PIPE transaction that is
signed concurrently with the merger agreement. Funding occurs at closing.
Morgan Lewis
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