SPACs have tapped PIPEs to bring in additional capital in a shorter amount of time to close de-SPAC mergers, Global Trade reports. Because of the nature of the SPAC process, there is often uncertainty surrounding the amount of cash that will be on hand following the merger. When combined with the SPAC proceeds in trust, the funds from the PIPE work together to provide liquidity for sellers and post-closing capital for the business to grow.
In SPAC 2.0, the enterprise value of the target is so many multiples of the SPAC proceeds in trust that a PIPE has become ubiquitous to bridge the value gap. Morgan Stanley data shows that on average, PIPE capital almost tripled the purchasing power of the SPAC, and for every $100 million raised through a SPAC, adding a PIPE added another $167 million. Read more.