Trump SPAC Loses About $200 Million; Trump Media’s Funding Partners to Return $1 Billion to Investors
The contentious special-purpose acquisition company attempting to merge with former president Donald Trump's social media network Truth Social has now lost the majority of its investment pledges, the latest stumbling block in this years-old deal. Digital World Acquisition Corp. [DWAC] lost over $191.5 million in planned investors after majority of the investors who previously expressed interest canceled them, carrying the overall cancellation to $533 million out of a $1 billion original commitment, the firm indicated in Securities and Exchange Commission filings on October 12, Forbes reported.
When the merger was first announced in 2021, DWAC's shares had increased by 800%, prompting analogies to meme stocks, per CBS News. But, DWAC shares have been dropping more than 80% since March as the company now faces an increasingly difficult battle to finalize its merger with Trump's Media organization.
Aside from the usual headaches associated with reverse mergers, the two companies have also dealt with a slew of legal issues, including the arrest of a former DWAC board member for insider trading ahead of the planned merger's announcement and Trump's legal battles with a slew of election-related charges, fraud charges, and more.
DWAC had approximately $1 billion in securities purchase agreements with some institutional investors, with the business noting in a regulatory filing that those investors had sent it termination notices totaling approximately $467 million. The company stated that it will "unwind the remaining balance" of the investment.
With the financing gone, it's unclear how Trump's media company, Trump Media & Technology Group, Truth Social's parent group, would pay for its operations after the merger. After the merger was completed, DWAC was supposed to give TMTG a large pool of capital.
However, the merger has been postponed several times, most recently in September when DWAC shareholders approved a one-year extension of the merger date between the two firms. Without the extension, DWAC would have had to deal with a liquidation at the time. "Today's announcement is an important step towards eliminating the PIPE — which TMTG believes would be in the best interest of TMTG's equity holders — and completing our merger with DWAC as soon as possible," said the CEO of TMTG, Devin Nunes, without providing any details as to how the cancelations could benefit the company.
Meanwhile, $DWAC management attempts to spin the cancellation of the PIPE commitments as positive.— Rollin Reisinger (@RollinReisinger) October 12, 2023
Only retail Trump zealots are left in this doomed deal. Longs will take a massive loss when the last wheel flies off. TMTG is a money pit with no path to value creation. pic.twitter.com/f2UUSHgljm
Even DWAC CEO Eric Swider tried to assuage shareholders with a similar tone on the cancelations being a "good thing." Swider said, "[D]espite how others may seek to characterize the [private investment in public equity, or PIPE] commitment cancellations, we want our shareholders to understand that these cancellations are a positive development in our ability to consummate the business combination." Swider too, did not provide an explanation on how this could be a good thing.
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