Investors are concerned about Digital World Acquisition Corp.’s prospective merger with former President Donald Trump’s company.
The investors want to protect their earnings against the prospective liquidation of the blank check company.
In October, DWAC shareholders will decide whether to extend the merger with Trump Media and Technology Group and its Truth Social Platform.
Investors are concerned about a potential unsuccessful merger with former President Donald Trump’s company, Digital World Acquisition Corp., which plans to take Trump Media and Technology Group public.
According to the Financial Times, DWAC Chief Executive Patrick Orlando is in talks with investors who have suggested they would back the company through a private investment in public equity, or PIPE, arrangement.
The $1 billion agreement was supposed to expire on Tuesday. If it fails, Trump Media will lose a lot of money, even if it does wind up going public through a merger with DWAC. According to the newspaper, Orlando was seeking for a 10-day extension.
According to the Financial Times, PIPE investors are trying to reduce the minimum conversion price for their preferred shares from $10 to as low as $2. Even in the worst-case situation, this would increase their potential profit on the sale by giving investors more shares and diluting other stockholders’ stakes, including Trump’s.
The agreement aims to shift risk to DWAC and Trump Media, which owns Truth Social. DWAC shares are currently trading around $20, down from $97 highs earlier this year but still above the liquidation price of $10.
According to the Financial Times, PIPE investors are trying to reduce the minimum conversion price for their preferred shares from $10 to as low as $2. Even in the worst-case situation, this would increase their potential profit on the sale by giving investors more shares and diluting other stockholders’ stakes, including Trump’s.
The agreement aims to shift risk to DWAC and Trump Media, which owns Truth Social. DWAC shares are currently trading around $20, down from $97 highs earlier this year but still above the liquidation price of $10.
DWAC has warned that if the merger deadline is not extended, the company may be forced to liquidate, returning stockholders roughly $10 per share, the original share price for a SPAC.
After being banned from Twitter following the Capitol riot on January 6, 2021, Trump launched Trump Media and Technology Group and its platform Truth Social. The former president is being investigated for various crimes, including attempting to rig the 2020 presidential election and removing classified papers from the White House. The proposed merger of Trump Media and DWAC is the subject of federal investigations investigating suspected securities offences.
SPACs have mainly dried up following a spike in 2020 and 2021. Two of “SPAC King” Chamath Palihapitiya’s blank-check companies were dissolved Tuesday after their deadlines passed without extension.
Orlando, the CEO of DWAC, saw one of his SPACs fail in 2021. He has until December to save Digital World Acquisition Corp. from a similar fate.
