1/ $ASTS So where is all the downward pressure coming from? A thread on PIPEs and their impact on SPACs post closing. #spacs #spacsquad

2/ $ASTS Typically PIPE investors are not allowed to hedge their long position by shorting shares (getting "boxed") before the closing of the SPAC merger. This is specifically written in the PIPE subscription agreement that is filed as part of the 8-K announcing the merger.

3/ $ASTS You can look this up by searching for "short sales" in the filing. Once a SPAC merger closes, the company is required to register the PIPE shares via S-1 process, in AST's case, within 30 calendar days.

4/ $ASTS The SEC may take 30 days to review the initial S-1 and then the company may file a S-1/A to respond to address the SEC's comments. It may take around 15 days for the S-1 to go effective (424B / EFFECT), at which point PIPE investors are free to sell their shares.

5/ $ASTS depending on the composition of PIPE holders: long only, strategics and hedge funds, and where the stock price is, you may see downward pressure on the day of and several days after when the shares can be sold.

6/ $ASTS That said, nothing stops PIPE investors from shorting shares between deal close and when the shares are registered. Historically PIPE investors didn't short shares because SPACs performed well and they wanted to keep upside exposure.

7/ $ASTS PIPE investors also wanted to avoid the risk of borrowing unstable stock that can get recalled in a short squeeze. The alternative of guaranteed and stable "term borrow" is very, very expensive.

8/ $ASTS But when shares are trading near $10, PIPE investors are much more worried about the downside risk and how much they can lose. So they will look to find as much borrow as they can and short shares to "box" as much of their long exposure as possible.

9/ $ASTS Boxing shares enables PIPE investors to flatten their position. Their long book has ASTS PIPE shares that they can't trade and their short book has ASTS shares short in an equal amount.

10/ When the PIPE shares are finally registered, they can take delivery of these shares and ask their prime broker to collapse the position with their exposure going to 0.

11/ $ASTS PIPE investors that may engage in shorting are the fast money hedge funds. You won't see this type of activity from long only or strategic investors.

12/ $ASTS So one thing you can do as an individual investor is to call your broker and take your shares out of their lending program similar to what $GME shareholders did to stop HFs from shorting.

13/ The biggest issue right now for $ASTS is that there's little institutional ownership or following for the company. That should change in the coming weeks as research coverage starts and we hear more from the company about customer wins and progress towards the launch of BW-3.

14/ We typically have to wait for the S-1 to be filed to see who the PIPE investors are and how much they hold. However in $ASTS case, we know 13M of the 23M PIPE shares are held by the strategics Vodafone, Rakuten, American Tower and Cisneros.

15/ Not a great start to trading in $ASTS, but I do think we'll see the technical selling abate with almost 7M shares traded thus far since merger closing.

16/ ARGHH forgot to give @SPACMAN17 credit for helping write this post! He's an active institutional investor with PIPE investing experience. Give him a follow for his informative posts. #spacs #spacsquad