Trump’s merger partner Digital World falls to around $16 after reaching $97 in early 2022

The Truth social network logo is seen on a smartphone in front of a screen of former US President Donald Trump in this photo illustration taken on February 21, 2022.

Given Ruvic | Reuters

The shares in Digital World Acquisition Corp. fell this week as the company missed a key deadline to hold on to about $1[ads1] billion in financing for its proposed merger with former President Donald Trump’s media company.

DWAC, which is a special purpose acquisition company, or SPAC, is set to be the vehicle to take Trump Media and Technology Group public. But the deal with Trump’s firm has run into several financial and legal hurdles.

At its peak in 2022, DWAC’s stock traded at $97. Now the stock is hovering around $16 as markets tumble, appetite for SPACs dries up and Trump faces mounting legal jeopardy. The stock fell around 3 percent on Friday.

DWAC secured $1 billion in financing from private investors in public equity, also known as PIPE, which would finance Trump Media after the merger. However, Tuesday marked the expiry of these investors’ contractual obligations to the deal, allowing them to withdraw the funding.

These investors receive convertible preference shares, which can be transferred to ordinary shares at a discount. 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 the PIPE investors did not immediately return a request for comment.

Losing $1 billion in funding is far from the only grief facing this deal and its involved parties. The merger is under investigation by the Securities and Exchange Commission for possible securities violations involving discussions of a deal prior to the merger announcement. The Ministry of Justice is also investigating the agreement.

In addition, Trump himself is facing increasing legal pressure. A lawsuit alleging widespread fraud by New York Attorney General Letitia James is just another in an already significant pile of legal action against the former president. The former president is also under investigation for the removal of sensitive White House documents, his role in the January 6, 2021 Capitol riot and his push to overturn the 2020 election results.

His Truth Social app, which was founded after the former president was banned from Twitter following the events of January 6, is currently banned from the Google Play Store for violating Google’s content moderation policy. Google and Truth Social said this week that they are still working on a solution.

If the merger goes through, it would bring about $300 million to Trump’s media company without $1 billion in PIPE investments. But even getting the $300 million will require navigating several hurdles.

DWAC must buy more time to get shareholders to approve delaying the merger by up to a year. DWAC CEO Patrick Orlando made a $2.8 million deposit to extend the merger deadline to December. A shareholder vote is required for the year-long extension the company is targeting, but DWAC has not been able to rally its many private investors to approve the extension so far. The next shareholders’ meeting is scheduled for 10 October.

Amid this mounting pressure, Trump Media issued a statement saying it would pursue legal action against the SEC for unduly obstructing the deal, blaming the “weaponization and politicization” of the Securities Exchange Commission.

“This inexcusable obstruction, which directly contradicts the SEC’s stated mission, hurts investors and many others who are simply following the rules and trying to grow a successful business,” Trump Media said.

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