More Than a PIPE Dream: How PIPE Financing Shapes Post-Merger Performance in SPACs

Sammanfattning

This paper examines whether Private Investment in Public Equity (PIPE) backed De-SPAC mergers generate different returns compared to their non-PIPE counterparts. Using a sample of 210 De-SPACs completed in the United States between 2022 and 2024, we compare buy-and-hold abnormal returns (BHAR) between 126 PIPE-backed and 84 non-PIPE-backed mergers over one-week and one-year horizons. The results confirm that PIPE-backed De-SPACs exhibit mean BHAR of 22.6 and 17.0 percentage points higher than non-PIPE-backed peers at the one-week and one-year horizons respectively. PIPE-backed deals also exhibit systematically lower redemption rates, consistent with the certification effect in which PIPE participation signals deal quality to the market. These findings address a gap in prior literature, as existing studies examine external financing as a continuous variable and do not directly test whether the binary presence of PIPE financing is associated with better post-merger returns. Given the consistent underperformance of De-SPACs, and SPACs' large share of recent US IPO activity, the binary presence of PIPE financing offers common shareholders and institutional investors a credible signal of deal quality when evaluating SPAC investments.