{ "docId": "019dd923-622c-750b-8b98-185c8a5e84a0", "docSlug": "dbd70945c810", "documentTitle": "Digital World Acquisition Corp (DWAC)", "authorId": "53_Kerrisdale_Capital", "authorName": "Kerrisdale Capital", "documentKindSlug": "research-note", "documentKindLabel": "Research note", "sourceTypeSlug": "short_seller", "sourceTypeLabel": "Short seller", "presentationDate": "2022-04-01 00:00:00", "orientation": "portrait", "aspectRatio": 0.77272725, "pageNumber": 20, "pageCount": 27, "prevPage": 19, "nextPage": 21, "slideType": "executive_summary", "function": "expose_contradiction", "density": "overcrowded", "nDataPoints": 6, "notes": "The slide uses a narrative structure to expose the 'sordid' nature of the PIPE deal, framing it as a mechanism for institutional profit at the expense of retail investors.", "elementsJson": [ "paragraph", "quote_block" ], "metadataConfidence": 0.95, "imagePath": null, "slideHref": "/slides/019dd923-622c-750b-8b98-185c8a5e84a0/20", "deckHref": "/decks/019dd923-622c-750b-8b98-185c8a5e84a0", "deckJsonHref": "/decks/019dd923-622c-750b-8b98-185c8a5e84a0.json", "deckAnchorHref": "/decks/019dd923-622c-750b-8b98-185c8a5e84a0#slide-20", "components": [ { "bbox": null, "kind": "callout", "text": "The conversion price and resale rights are designed to allow institutions involved in the PIPE to buy stock at a steep discount and instantly flip it to retail investors for minimal risk.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd953-3f41-721f-9e57-f80d11df2c4d", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.085, "w": 0.77, "x": 0.118, "y": 0.75 }, "kind": "paragraph", "text": "The sordid situation of DWAC, TMTG, ARC Global, EF Hutton, PIPE investors, et al., with their inherent and inextricable conflicts of interest, underscores a key problem with the whole SPAC industry.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "17cafbce-f78e-4cb1-bac6-7a9e4ce46d70", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.115, "w": 0.77, "x": 0.118, "y": 0.445 }, "kind": "paragraph", "text": "The conversion price and resale rights are designed to allow institutions involved in the PIPE to buy stock at a steep discount and instantly flip it to retail investors for minimal risk.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "1973aeb5-9cb1-49a7-985a-739fac690625", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.185, "w": 0.77, "x": 0.118, "y": 0.163 }, "kind": "paragraph", "text": "The pricing of the PIPE is also very unusual. Per the release: The per-share conversion price of the fully committed convertible preferred stock PIPE transaction represents a 20% discount to DWAC's volume-weighted average closing price...", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "95bd5e09-996e-4a36-9d78-5a923830c9e2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.085, "w": 0.77, "x": 0.118, "y": 0.565 }, "kind": "paragraph", "text": "PIPE investors are effectively acting as well-compensated intermediaries, a role that the SEC may find as drawing concerning parallels to that of an underwriter.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "9c2d4b3c-55ac-40cd-b311-e7a32c3cfbad", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.045, "w": 0.77, "x": 0.118, "y": 0.094 }, "kind": "paragraph", "text": "institutional investors to profit with limited risk and freely exit their positions, not one or two months after merger close, as is typical, but as soon as the merger closes.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "bf03faf0-46ea-4e39-bcbf-8aed5c2c93c9", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.085, "w": 0.77, "x": 0.118, "y": 0.355 }, "kind": "paragraph", "text": "The initial conversion price per share was struck at $33.60. If, for example, the day after the merger closes, the closing VWAP is $70 (i.e., above $56), PIPE investors would receive shares at $33.60 and be able to immediately flip it for a $36.40 gain.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d603aef3-73fc-4769-bc8f-dccdbea9561c", "frameworkName": null, "frameworkSlug": null }, { "bbox": null, "kind": "quote", "text": "there is no way the SEC isn't going to demand a host of disclosures and explanations for why a $1bn PIPE, that no one knows who is participating in, is structured in such a manner that smacks of taking advantage of retail investors. I would be shocked if the PIPE survives as is. — A former SEC enforcement attorney", "attrs": null, "subkind": null, "toolName": "Authority citation", "toolSlug": "authority-citation", "confidence": null, "componentId": "019dd953-3f41-721f-9e57-fe5fd4bbe98b", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.03, "w": 0.15, "x": 0.118, "y": 0.705 }, "kind": "title", "text": "Conclusion", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "2c9e1043-e379-472d-a790-a49aa096fd47", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [], "frameworks": [ { "name": "fraud-exposure", "slug": null, "matchId": "440a9da2-e8b8-4ca4-9593-9de7d85b06ca", "evidence": "The slide explicitly details how the PIPE structure is designed to allow institutional investors to profit at the expense of retail investors, framing it as a 'sordid' and 'abusive' practice.", "confidence": 0.9 } ], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }