PC: Yahoo News
Investors are worried about a potential botched merger with former President Donald Trump’s business, according to Digital World Acquisition Corp., the firm trying to publicize Trump Media and Technology Group.
According to a report in The Financial Times published on Tuesday, Patrick Orlando, the chief executive of DWAC, is in negotiations with investors who have pledged to support the business through a private investment in public equity, or PIPE, arrangement.
The $1 billion agreement was scheduled to end on Tuesday. Even if it does wind up going public via a merger with DWAC, Trump Media would lose a significant amount of money if it all goes apart. According to the publication, Orlando was attempting to obtain a 10-day extension.
According to a person involved in the negotiations, the PIPE investors want to reduce the minimum conversion price for their preferred stock from $10 to as little as $2. Even in the worst-case scenario, that would increase their potential profit on the deal because it would give the investors more shares and reduce the ownership holdings of other shareholders, including Trump’s.
By negotiating, DWAC and Trump Media—which owns Truth Social—are attempting to transfer risk. The price of DWAC shares is currently about $20, down from highs of $97 earlier this year but still more than the $10 liquidation price.
According to one person engaged, “Trump wants to make sure he doesn’t face a lot of dilution.” Ideally, he wants to stay away from a $2 floor. He doesn’t want to appear weak, yet it makes him look weak.
A request for comment was not immediately answered by DWAC or Trump Media representatives.
DWAC is a SPAC—a special purpose acquisition company—that lists existing businesses on the stock market. With a $2.8 million investment from his company, the SPAC sponsor, ARC Global Investments II, Orlando extended a deadline to merge with Trump Media past its original early September target date. Shareholder approval of a one-year deadline extension is being pushed by DWAC. The next monthly shareholder meeting is scheduled.
The company might be forced to liquidate, repaying stockholders about $10 per share—the original share price for a SPAC—if the merger deadline is not postponed, according to DWAC’s warning.
After being suspended from Twitter as a result of the Capitol riot on January 6, 2021, Trump established Trump Media and Technology Group and its website Truth Social. The attempt to rig the 2020 presidential election and the removal of secret papers from the White House are both subjects of numerous investigations involving the former president. The proposed merger of Trump Media and DWAC is being investigated by the federal government for possible securities offences.
SPACs have mostly stopped after a spike in 2020 and 2021. Tuesday, when two of “SPAC King” Chamath Palihapitiya’s companies’ deadlines had gone without being extended, he allowed them to dissolve.
One of Orlando’s SPACs, who served as CEO of DWAC, was dissolved in 2021. He has until December to stop the same thing from happening to Digital World Acquisition Corp.