The Truth social network logo is seen on a smartphone in front of the screen of former US President Donald Trump in this illustration photo taken on February 21, 2022.
Dado Ruvic | Reuters
Shares of Digital World Acquisition Corp. fell this week as the company missed a key deadline to keep about $1 billion in financing for a proposed merger with former President Donald Trump’s media company.
DWAC, as a special purpose acquisition company, or SPAC, was set up to be the ship that brought Trump Media and Technology Corporation to the public. But the deal with Trump’s company ran into a number of financial and legal hurdles.
At its 2022 peak, shares of DWAC were trading at $97. Now its share price sits at around $16 as markets slide, appetite for SPAC dries up, and Trump faces growing regulatory risk. Shares fell about 3% on Friday.
DWAC has secured $1 billion in funding from private investors in public equity, also known as PIPE, which will fund Trump Media after the merger. However, Tuesday marked the expiration of these investors’ contractual obligations on the deal, allowing them to withdraw capital.
These investors are awarded convertible preferred shares, which can be converted into common shares at a discounted price. By converting and selling these shares, PIPE investors also have the power to significantly dilute the holdings of other investors including former President Trump.
Trump Media, DWAC and PIPE investors were not immediately available for comment.
Losing $1 billion in financing isn’t the only bad thing facing this deal and its stakeholders. The fusion is is being investigated by the Securities and Exchange Commission for possible securities violations in connection with discussions of an agreement prior to the merger announcement. The Department of Justice is also looking into the deal.
In addition, Trump himself is facing increasing legal pressure. A lawsuit alleges widespread fraud from New York Attorney General Letitia James It’s just another in a string of already sizable legal actions against the former president. The former president is simultaneously being investigated for the removal of sensitive documents from the White House, his role in the January 6, 2021 Capitol riots, and his attempt to overturn the results. election 2020.
His social app Truth, founded after the former president was banned from Twitter following the events of January 6, currently banned from the Google Play store for violating Google’s content moderation policy. This week, Google and Truth Social said they were still working on a solution.
If the merger goes through, it would provide about $300 million to Trump’s media company without a $1 billion investment in PIPE. But even getting to that $300 million will require a number of hurdles to overcome.
DWAC needs more time for shareholders to approve the merger delay up to one year. DWAC CEO Patrick Orlando has put down a $2.8 million deposit to extend the merger deadline to December. A shareholder vote is required for the one-year extension the company is aiming for. coming, but DWAC has been unable to rally many of its retail investors to approve the extension so far. The next shareholder meeting is scheduled for October 10.
Amid these mounting pressures, Trump Media released a statement saying it would pursue legal action against the SEC for unduly obstructing the deal, blaming “weaponization and politicization of the deal.” ” by the Securities and Exchange Commission.
“This inexcusable obstruction, which is in direct conflict with the SEC’s stated mission, is harming investors and many others who are simply following the rules and trying to expand a successful business,” Trump Media said.
