posted ago by SaltyKarens ago by SaltyKarens +419 / -0

"We'll start from the beginning.

The reason any company trades on a public stock exchange is simple: to raise capital for growing and operating their business.

However, unlike the traditional IPO (initial public offering) route, which takes longer to complete and has significantly more regulations associated with it, TMTG elected to go public through a SPAC (Special Purpose Acquisition Company). That SPAC deal, in this case with DWAC (Digital World Acquisition), will be consummated with a merger between DWAC and TMTG in a few months and raise capital for TMTG through the assets DWAC holds and what will hopefully be an elevated share price for DWAC. Once the deal is completely finalized approved, DWAC will most likely trade as TMTG (but if you ask me, MAGA or TRMP would be more badass, lol).

However, after the initial definitive merger agreement between DWAC and TMTG was announced on 10/20/21, it's standard for SPACs to go through an additional round of fund raising called a PIPE, which stands for private investment in public equity. Instead of doing a secondary offering, which is what most companies who started trading after a traditional IPO do and simply means the company issues more shares to the public on a stock exchange that in turn raises more money for the company, most SPACs elect to raise that money privately through PIPEs.

A PIPE allows large, private investors to come in and receive shares at a discount. And like a SPAC deal, PIPEs are quicker and more efficient to execute, which means capital can be raised faster for newer companies like TMTG who need it a little more quickly. So, is that bad for regular retail investors like us? No! At least not if the terms of the agreement are favorable to them! Companies have to provide an incentive for large, institutional investors to invest in their company, which is why most PIPEs are provided at a STEEP discount and are usually offered for ONLY 10$ A SHARE, which is near SPAC's NAV (net asset value). In other words, most PIPEs are only priced near the net amount of cash most SPACs have on hand and create SIGNIFICANTLY more dilution for current shareholders than the one being announced for DWAC.

However, DWAC/TMTG were able to secure what could turn out to be the HIGHEST and GREATEST PIPE deal in the history of SPACs thanks to retail APES AND HODLERS like us who proved to big investors how VALUABLE they believe TMTG really is and can become. According to this article, https://www.reuters.com/markets/us/exclusive-trumps-social-media-venture-seeks-1-billion-raise-sources-2021-12-01/, our PIPE deal would be anchored to the 10-day VWAP average. This is the break down:

10-day anchored VWAP: 45.98$ (The Reuters article mentioned the 10-day anchored VWAP as the benchmark to price the PIPE).

20% discount (according to the article): 45.98*0.2 = 9.19. 45.98 - 9.19 = 36.79$.

IF they price the PIPE ANYWHERE near that range, it's HUGE for us.

It would make it the highest priced PIPE for a SPAC EVER and mean FAR LESS dilution for shareholders! A high PIPE price like the one being offered to DWAC means it can issue or sell fewer shares to hedge funds and still receive the same amount of capital (1 billion) it’s seeking for those shares.

In other words, fewer shares being issued to investors to reach their capital raise target would mean current shareholders are diluted less and not more like in most other PIPE deals. Therefore, the fact that they were most likely able to strike a deal at elevated levels is amazing news.

According to that article, Trump called hedge funds and family investment offices up in person and asked them to invest large sums north of 100 million. THEY COULDN'T say NO to the former PRESIDENT OF THE UNITED STATES! This news regarding the PIPE couldn't be any greater considering I was expecting a far more limited investment in the 20-25$ range to be announced (which would have still been much, much higher than most PIPE deals). TRUMP REALLY CAME THROUGH FOR HIS INVESTORS HERE!

A quote from the article: “Digital World shares soared on Wednesday, as investors welcomed the news that the PIPE could dilute existing Digital World shareholders less than they expected by pricing at a level much higher than the customary $10 per share seen in most mergers with blank-check firms.”

Ironically, some idiots over at r/SPACs got this deal completely wrong are getting ready to short DWAC because they think the high PIPE price is bad for us, lol. They're literally thinking about this deal backwards! I thought that sub had more OG SPAC investors who actually know what they're talking about!

Some quotes from over there:

u/paperpeddler: Cant wait to short in the am

u/AlwaysBlamesCanada: This makes no sense - the price should be tanking

u/Tfarecnim: So what you're saying is buy puts first thing in the morning, got it.

u/FUPeiMe: So logically people are piling in after hours so they can be first in line... to be diluted.

HAHAHAHA. What makes it even more sad is how many upvotes those idiotic comments received!


To conclude, the fact that large institutional investors would NOT ONLY invest in DWAC but agree to invest in DWAC at SUCH ELEVATED levels that completely exceed any TRADITIONAL PIPE deal is HUGE news for us and EXTREMELY BULLISH!!! I couldn't be happier with this deal."


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GreazyCheeks 4 points ago +4 / -0

Is it too late to buy in? I have 5 shares at $18, but I don't want to raise my average by adding now. Help a newbie out please.

SaltyKarens [S] 4 points ago +4 / -0

Not sure. There are probably some are bag holders that got caught during the last big spike and purchased shares above $150. Then you have others who are just catching the news this AM that will buy just to the fear of missing out.

Treat it like a casino, only invest in what you are willing to lose.