Trump merger partner Digital World drops to around $16 after hitting $97 in early 2022

Trump merger partner Digital World drops to around $16 after hitting $97 in early 2022
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In this illustrated illustration taken on February 21, 2022, the Truth social network logo appears on a smartphone in front of former US President Donald Trump’s screen.

Dado Ruvic | Reuters

Shares Digital World Acquisition Corp. The company crashed this week as it missed an important deadline to hold on to nearly $1 billion in funding for a proposed merger with former President Donald Trump’s media company.

DWAC, or SPAC, a special-purpose acquisition company, has been identified as the vessel that will offer Trump Media and Technology Group IPO. But the deal with Trump’s firm faced many financial and legal hurdles.

At its 2022 peak, DWAC stock was trading at $97. Now, the share price sits around $16 as markets slide, appetite for SPACs wanes, and Trump faces increasing legal peril. The stock fell nearly 3% on Friday.

DWAC has secured $1 billion in financing from private investors in public equity, also known as PIPE, which will fund Trump Media after the merger. But on Tuesday, it allowed these investors to withdraw their funds, marking the end of their contractual obligations to the deal.

These investors are issued convertible preferred shares that can be converted into common stock at a discount. PIPE investors also have the power to significantly dilute the holdings of other investors, including former president Trump, by converting and selling these shares.

Trump Media, DWAC and PIPE investors did not immediately request a comment.

Losing $1 billion in funding isn’t the only ordeal facing this deal and its stakeholders. merger Under investigation by the Securities and Exchange Commission for possible securities breaches involving discussions about a deal prior to the merger announcement. The Justice Department is also reviewing the deal.

In addition, Trump himself is facing increasing legal pressure. New York Attorney General Letitia James sued over alleged widespread fraud It’s just one of an already sizable pile of legal action against the former president. The former president is under investigation for the removal of sensitive documents from the White House at the same time his role in January. January 6, 2021, the Capitol revolt and his pressure to overthrow the 2020 election results.

The Truth Social app, founded after the former president, was banned from Twitter after the January 1 events. 6, currently banned from Google Play store For violating Google’s content moderation policies. Google and Truth Social said they are still working on a solution this week.

If the merger materializes, it would provide approximately $300 million to Trump’s media company without the $1 billion investment in PIPE. But even to get that $300 million, a few more hurdles will have to be overcome.

DWAC needs to buy more time to get shareholders to approve deferring the merger for up to one year. DWAC CEO Patrick Orlando has placed a $2.8 million deposit to extend the merger deadline until December. The company’s targeted year-long extension requires a shareholder vote, but DWAC has so far been unable to rally many retail investors to approve the extension. The next shareholder meeting is scheduled for October. 10.

Amid this growing pressure, Trump Media released a statement blaming the “armization and politicization” of the Securities Exchange Commission, saying it will take legal action against the SEC for needlessly obstructing the deal.

Trump Media said, “This unforgivable hurdle, which directly contradicts the SEC’s stated mission, hurts investors and many others who simply follow the rules and try to grow a successful business.” Said.

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