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M&A & Alternative Exits

Overview

Section titled “Overview”

Not all companies exit via IPO. PIPO must handle alternative exit scenarios:

  • M&A (Merger & Acquisition): Company is acquired by another entity
  • Tender Offer: Structured buyback of shares
  • Down-Round: Significant valuation reduction
  • Dissolution: Company fails or winds down
  • Delisting/Indefinite Delay: IPO postponed indefinitely

M&A Settlement

Section titled “M&A Settlement”

Acquisition Types

Section titled “Acquisition Types”
TypeSettlement BasisComplexity
All-CashDeal price per shareSimple
All-StockAcquirer stock valueModerate
MixedCash + stock componentsComplex
EarnoutBase + contingentVery complex

All-Cash Acquisition

Section titled “All-Cash Acquisition”
Scenario: SpaceX acquired for $300B cash


Settlement:
├── Deal announcement: Event window opens (72h)
├── Deal valuation: $300B
├── Warrant settlement price: $300B
├── Timing: At deal close


Example:
├── User holds: SPACEX-CALL-200B
├── Deal price: $300B
├── Intrinsic value: ($300B - $200B) / $200B = 50%
└── Payout: $0.50 per $1 notional

Stock Acquisition

Section titled “Stock Acquisition”
Scenario: SpaceX acquired for Google stock (0.5 GOOG per SPACEX share)


Settlement Process:
├── Step 1: Calculate SpaceX implied value
│   └── SpaceX shares × 0.5 × GOOG price at close
├── Step 2: Use implied value for warrant settlement
├── Step 3: Cash settle based on implied valuation
└── No stock distributed (would complicate structure)


Example:
├── Exchange ratio: 0.5 GOOG per SPACEX
├── GOOG price: $180
├── SpaceX shares: 1B outstanding
├── Implied SpaceX value: 1B × 0.5 × $180 = $90B
└── Settlement based on $90B valuation

Mixed Consideration

Section titled “Mixed Consideration”
Scenario: $150B cash + $100B in acquirer stock


Settlement:
├── Total deal value: $250B
├── Cash component: $150B (60%)
├── Stock component: $100B (40%)
├── PIPO settlement: Cash only, based on $250B total
└── Stock component valued at announcement date


Note: PIPO always settles in cash regardless of deal structure.

Tender Offers

Section titled “Tender Offers”

Company-Initiated Tender

Section titled “Company-Initiated Tender”
Scenario: Company offers to buy back shares at premium


Treatment:
├── If tender price implies valuation > strike: ITM
├── If tender price implies valuation < strike: OTM
├── Event window: Opens on tender announcement
├── Settlement: Based on tender price
└── Participation: Optional (can hold for future)


Example:
├── Company tenders at $200/share
├── Fully diluted shares: 500M
├── Implied valuation: $100B
├── Warrants with $80B strike: ITM (25% intrinsic)
├── Warrants with $120B strike: OTM
└── Exercise decision: User choice during window

Mandatory Tender (Going Private)

Section titled “Mandatory Tender (Going Private)”
Scenario: PE firm takes company private


Treatment:
├── All warrants must settle at tender value
├── No option to hold for future upside
├── Event window: 72h from announcement
├── Settlement: Mandatory cash settlement
└── Pricing: Based on going-private valuation


Note: This is effectively a forced exercise for all holders.

Down-Round Events

Section titled “Down-Round Events”

Significant Valuation Reduction

Section titled “Significant Valuation Reduction”
Definition: >30% reduction from last oracle price


Scenario: SpaceX valued at $180B, new round at $120B


Treatment:
├── Event window: Opens (48h)
├── Oracle price: Updates to $120B
├── Impact on warrants:
│   ├── Call $150B strike: Now OTM (was ITM)
│   ├── Call $180B strike: Deeper OTM
│   ├── Put $180B strike: Now ITM
│   └── Put $150B strike: Still OTM but closer
├── User action: Can exercise puts during window
└── Post-event: Normal trading resumes

Bridge Financing / Rescue Round

Section titled “Bridge Financing / Rescue Round”
Scenario: Company raises emergency funding at deep discount


Treatment:
├── Similar to down-round
├── Oracle adjusts to new valuation
├── If anti-dilution provisions in shares, may adjust strike
├── PIPO warrants: No automatic strike adjustment
└── Users bear full downside risk

Company Failure / Dissolution

Section titled “Company Failure / Dissolution”

Bankruptcy / Wind-Down

Section titled “Bankruptcy / Wind-Down”
Scenario: Company files for bankruptcy or dissolves


Settlement:
├── Event: Dissolution announcement
├── Valuation: $0 (or liquidation value if any)
├── Call warrants: Expire worthless
├── Put warrants: Fully ITM
│   └── Payout: 100% of strike notional
└── Timing: Event window + immediate settlement


Example:
├── Company declares bankruptcy
├── SPACEX-CALL-180B: Worth $0
├── SPACEX-PUT-180B: Worth $1 per $1 notional (100%)
└── Put holders receive full settlement

Fraud / SEC Action

Section titled “Fraud / SEC Action”
Scenario: Company found to have fraudulent accounting


Treatment:
├── Trading: Immediately suspended
├── Oracle: Frozen at last valid price
├── Investigation: Oracle Committee + legal review
├── Settlement: Based on determined "fair value"
│   └── May use last credible valuation
├── Timing: Delayed until clarity
└── Recourse: Insurance fund for systematic issues

Indefinite Delay

Section titled “Indefinite Delay”

IPO Postponed Indefinitely

Section titled “IPO Postponed Indefinitely”
Scenario: Company announces no plans to IPO


Treatment:
├── Not an exit event (no special window)
├── Warrants continue trading normally
├── May impact market sentiment (price drops)
├── Expiry: Normal expiry rules apply
└── User options:
    ├── Hold to expiry
    ├── Sell on AMM
    └── Roll to later expiry

Company Goes “Zombie”

Section titled “Company Goes “Zombie””
Scenario: Company neither grows nor exits, remains private indefinitely


Treatment:
├── Oracle updates become less frequent
├── Liquidity may thin as interest wanes
├── Warrants approach zero time value near expiry
├── Long-dated warrants retain some value
└── Platform may de-list very inactive underlyings

Settlement Price Determination

Section titled “Settlement Price Determination”

M&A Price Committee

Section titled “M&A Price Committee”

For complex M&A scenarios, the Oracle Committee follows:

M&A Settlement Price Determination:


1. Primary Source: Official deal announcement price
2. If stock deal: Acquirer stock price at close of announcement day
3. If earnout: Base consideration only (ignore contingent)
4. If multiple bidders: Winning bid only
5. If deal fails: No settlement event, trading continues
6. Disputes: 3/5 committee vote, arbitration available

User Communication

Section titled “User Communication”

M&A Alert Example

Section titled “M&A Alert Example”
┌─────────────────────────────────────────────────────────────────┐
│              🏢 M&A ALERT: STRIPE                               │
├─────────────────────────────────────────────────────────────────┤
│                                                                 │
│  Stripe has announced an acquisition!                          │
│                                                                 │
│  Deal Details:                                                  │
│  ├── Acquirer: Visa Inc.                                       │
│  ├── Deal Type: Cash + Stock                                   │
│  ├── Total Value: $85B                                         │
│  ├── Cash Component: $50B (59%)                                │
│  ├── Stock Component: $35B (41%)                               │
│  └── Expected Close: Q2 2026                                   │
│                                                                 │
│  Settlement Valuation: $85B                                    │
│                                                                 │
│  Your Positions:                                                │
│  ├── STRIPE-CALL-65B-Q22026: 5,000 tokens                      │
│  │   └── Status: 🟢 ITM (Strike $65B < Deal $85B)              │
│  │   └── Est. Payout: 30.8% = $1,540                           │
│  └── STRIPE-CALL-100B-Q22026: 1,000 tokens                     │
│      └── Status: 🔴 OTM (Strike $100B > Deal $85B)             │
│      └── Est. Payout: $0                                        │
│                                                                 │
│  Event Window: Jan 15, 2026 - Jan 18, 2026 (72h)              │
│                                                                 │
│  [Exercise Now] [View Deal Details] [Set Reminder]             │
│                                                                 │
└─────────────────────────────────────────────────────────────────┘

API Reference

Section titled “API Reference”

Get Exit Event

Section titled “Get Exit Event”
const exitEvent = await pipo.getExitEvent('STRIPE');


// Response
{
  underlying: 'STRIPE',
  eventType: 'M&A',
  status: 'ANNOUNCED',
  announcement: {
    date: '2026-01-15',
    acquirer: 'Visa Inc.',
    dealType: 'CASH_AND_STOCK',
    totalValue: 85000000000,
    cashComponent: 50000000000,
    stockComponent: 35000000000,
    expectedClose: '2026-06-30'
  },
  settlementValuation: 85000000000,
  exerciseWindow: {
    opens: '2026-01-15T14:00:00Z',
    closes: '2026-01-18T14:00:00Z'
  },
  affectedWarrants: [
    {
      symbol: 'STRIPE-CALL-65B-Q22026',
      status: 'ITM',
      estimatedPayout: 0.308
    }
  ]
}

Exercise on M&A Event

Section titled “Exercise on M&A Event”
const exercise = await pipo.exerciseOnExitEvent({
  warrant: 'STRIPE-CALL-65B-Q22026',
  amount: 5000,
  eventId: 'MA-STRIPE-2026-001'
});


// Response
{
  exerciseId: 'MA-EX-2026-001',
  status: 'PENDING_DEAL_CLOSE',
  tokensLocked: 5000,
  estimatedPayout: 1540,
  contingency: 'Settlement upon deal close',
  expectedSettlement: '2026-07-05'
}

Next Steps

Section titled “Next Steps”