The Trump-linked SPAC falls amid uncertainty over whether the deal will close

(Bloomberg) — Investors dumped shares of Digital World Acquisition Corp., the blank check firm set to merge with Donald Trump’s social media company, after executives postponed a shareholder vote that would have gotten an extension to close the deal — signaling uncertainty about sponsors’ ability to obtain sufficient support.

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Executives at the private equity firm postponed the meeting to extend the deadline by up to a year to Thursday in a bid to persuade retail shareholders to vote, a group that has historically skipped such events. The SPAC needs 65% of shareholders to support the extension.

Shares of Digital World fell as much as 21% to $19.70 on Tuesday, the lowest level since the deal was announced in October, while warrants linked to the firm sank 27%. Its shares fell earlier on Tuesday after Reuters reported that the sponsors did not expect to get enough support from holders for a one-year extension of the deal with Trump Media & Technology Group.

Trading volume for both the stock and warrants was more than ten times normal as of 12:11 p.m. in New York. More than 3 million shares changed hands as approximately 613,000 warrants were flipped.

Digital World shares have soared to $175 since the merger with the former president’s company was announced in October, becoming a favorite among retailers. The February launch of Trump’s social media site, Truth Social, provided another boost before disappointing downloads for the platform and regulatory issues facing Digital World weighed on the stock.

The SPAC gave itself a one-year deadline to close a deal when it debuted last September before risking having to return the millions it raised to investors. The sponsor’s terms do allow him to extend his deadline to six months, but that would cost the team millions of dollars as it would pile up money in his trust account.

“I’m not going to touch it,” said Matthew Tuttle, CEO of Tuttle Capital Management. The risk is too great, and even if the SPAC extends its term by six months, “that might just kick the can down the road.”

Retailers discussed Digital World but did not appear to be actively buying the dip. The company’s ticker was trending on the popular chat room, Stocktwits, but was not among the 30 most traded assets on Fidelity’s platform as of 11:57 a.m. in New York.

The blank check firm said in July that a federal grand jury was seeking information from Trump Media & Technology Group about the planned deal, while the Securities and Exchange Commission issued a subpoena for such information that week. Digital World said at the time that the grand jury was also seeking information from certain current and former TMTG employees.

CF Acquisition Corp. VI, the SPAC that makes video platform Rumble Inc. public, rose 8.4% ahead of a deadline for shareholders to vote next week. Rumble has a technology and cloud services agreement with Trump Media.

(Updates with further details throughout.)

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