Digital World Acquisition Corp. (NASDAQ:DWAC) has added a $50 million PIPE made up of convertible notes that convert to units at $8 per unit bearing one common share and a half warrant.

The notes overall fit the terms that the SPAC hinted at when it disclosed it had finalized the dissolution of its original $1 billion PIPE for its combination with Trump Media & Technology Group. As previewed, the notes bear an 8% interest rate with a 12-month maturity, but they unlikely to remain unconverted for quite that long.

That’s because the key detail not released until now was the conversion price of the notes. Even though Digital World is down about -4% since market open on the news of the notes, its current trading price near midday of about $45.50 would still represent a more than 5x return as soon as noteholders converted them.

Digital World also issued 3,050,000 warrants to institutional investors, each granting the right to purchase one share at $11.50 per share that are transferable only among the holders’ affiliates. One would think these would similarly be convert quickly after close and would have a serious market if they were tradeable – the 1/2 warrants from Digital World’s IPO units (NASDAQ:DWACW) now trade above $15 – but these newly issued warrants are not transferrable beyond the investor’s own affiliates.

So, why the big discount? This isn’t he first time that a SPAC’s retail buzz has run up prices in a way that complicated ongoing PIPE negotiations.

Churchill IV famously faced a drawn out dealmaking process once word leaked that it was considering merging with luxury EV-maker Lucid (NADSAQ:LCID). In those heady days, this chatter spiked Churchill IV’s stock above $64 before an announcement was even made, but it was unclear how long such enthusiasm would last.

In the end, the deal’s $2.5 billion PIPE was struck at $15 per share, a -74% discount to its previous trading price, but as the press release cheekily described it, “a 50% premium to [the SPAC’s] net asset value”. Just the day before, Rodgers Silicon Valley struck a PIPE at $14 per share, which was itself an -11% discount to its shares’ last closing price.

The market for SPACs and PIPEs in particular has clearly turned forcefully in the other direction since early 2021, but has it gotten so tight that a SPAC trading at $45.50 can only lock down a PIPE of modest size at a -20% discount to NAV?

That is clearly not the case, as next week is likely to see the closing of Flame‘s (NYSE:FLME) combination with Sable Offshore, which attracted a $520 million PIPE at $10 per share without extra bells and whistles attached.

Digital World’s special circumstances, rather, appear to be playing a greater role. For one, it asked investors to make 20% of the investment ($10 million) immediately drawable with the remainder due at closing. That’s not unheard of in SPAC structures, especially for tech companies that still need some runway to burn while the de-SPAC process runs its course.

But, for Digital World, it appears to have come at a high cost due to the significant chance that this combination never makes it to close. The parties have already been trying to make it happen for nearly two and a half years since announcing it in October 2021. Digital World would need another vote to extend its transaction deadline beyond September 7, at which point it would also be passing beyond 36 months of existence.

Plus, there is the November election and the various court cases swirling around Donald Trump to consider. A majority of SPACInsider readers, for their part, said in a poll this week that they doubt the deal makes it over the finish line.

Both the SPAC and target clearly need cash on hand to fund ongoing working capital needs. But, it is telling that the ask for $10 million up front drove the risk premium so far as to provide such investor-friendly terms for the whole $50 million.