Trump SPAC faces new investor pressure as Digital World merger hangs in balance

The social media app will be developed by Trump Media and Technology Group (TMTG).

Rafael Henrique | LightRocket | Getty Images

Digital World Acquisition Corp., the company that plans to take Trump Media and Technology Group public, is facing investor concerns about a potential failed merger with former President Donald Trump’s company.

The Financial Times reported on Tuesday that DWAC chief executive Patrick Orlando is in talks with investors who said they would back the company through a private investment in public equity, or PIPE, deal.

The $1 billion deal expired on Tuesday. If it falls apart, it would mean a lot less money for Trump Media, even if it ends up going public through a merger with DWAC. Orlando was pushing for a 10-day extension, according to the paper.

PIPE investors hope to reduce the minimum conversion price for their preferred shares from $10 to $2, the FT reported, citing a person involved in the talks. This would increase its potential profit from the deal, even in a worst-case scenario, as it would give more shares to investors and dilute the holdings of other shareholders. – including Trump’s.

The deal is an attempt to shift risk to DWAC and Trump Media, which owns Truth Social. DWAC shares are currently trading around $20, down significantly from highs of $97 earlier this year, but still above the $10 settlement price.

“Trump wants to make sure he doesn’t face a lot of dilution,” a person involved told the FT. “Optically, he wants to avoid a $2 floor. He looks weak and he doesn’t want to look weak.”

Representatives for DWAC and Trump Media did not immediately respond to a request for comment.

DWAC is a special purpose acquisition company, or SPAC, a publicly traded entity that takes pre-existing companies public. Orlando extended the deadline to merge with Trump Media beyond its early September date with a $2.8 million infusion from his company, SPAC sponsor ARC Global Investments II. DWAC is lobbying shareholders to approve a one-year extension of the deadline. The next shareholders’ meeting is set for next month.

If the merger deadline is not extended, DWAC has warned that the company may have to liquidate, returning to shareholders about $10 per share, the initial share price of a SPAC.

Trump founded the Trump Media and Technology Group and its platform Truth Social after he was banned from Twitter following the Capitol riot on January 6, 2021. The former president faces multiple investigations related to the attempted void the 2020 presidential election and the removal of sensitive documents from the White House. Trump Media’s planned merger with DWAC is the subject of federal probes into possible securities violations.

After a boom in 2020 and 2021, SPACs have largely dried up. “SPAC King” Chamath Palihapitiya let two of his blank check companies dissolve on Tuesday as their deadlines passed without an extension.

DWAC CEO Orlando saw one of his SPACs liquidate in 2021. He has until December to prevent Digital World Acquisition Corp. have the same luck

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