The special-purpose acquisition company trying to take Trump Media & Technology Group public will pay nearly $3 million to get three more months to complete the deal, tightening the already narrow path to the merger.
added 2.8% to $24 a share on Friday after confirming late Thursday that failed to obtain investor approval to extend the merger deadline by one year. The stock has hovered between $20 and $25 for most of this week.
Confirmation was expected after the SPAC postponed the shareholders’ meeting for two days on Tuesday and said in a statement that it was willing to pay for the three-month extension.
Digital World Acquisition’s management may pay another $3 million in December for three more months to complete the merger. Many analysts say it may take more than that resolution of investigations from the Securities and Exchange Commission and federal prosecutors about how the deal came about and the communications between the two parties prior to their merger agreement.
“The SEC unnecessarily delayed its review of our proposed merger, causing real and unnecessary financial harm to DWAC’s investors,” Trump Media & Technology Group said in a statement Thursday. “The SEC must set aside any inappropriate political considerations and bring its review to a swift conclusion.”
The SEC declined to comment.
SPAC and Past President
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alternative Truth Social will still have to disclose a lot of information in regulatory filings that will be subject to SEC approval before shareholders can hold a final vote to approve the deal.
The SPAC needed 65 percent shareholder approval by Thursday to get a one-year extension, but had trouble getting individual investors to vote. It’s an example of investors failing to make something simple within their control cost money, analysts say — and a downside to owning stocks driven by retail investor speculation, because many of them are not familiar with shareholder meetings. The stock has fallen in recent weeks as the original deadline approaches.
The SPAC’s creators deposited nearly $3 million into its trust account, which held approximately $290 million.
Merger and liquidation deadlines are common for SPACs, which typically have about two years to close a deal or else have to return the money they raised to shareholders. Digital World Acquisition CEO Patrick Orlando postponed this week’s shareholder meeting several times to give shareholders more time to vote on the one-year extension before announcing the three-month move. Finally, he adjourned the meeting to October 10.
A blank check merger could give the former president’s company as much as $1.3 billion in cash. Mr. Trump said recently on Truth Social that he does not need financing and hinted that the company may try to raise money privately. The company raised about $20 million in convertible bonds last year and an additional $15 million in the first quarter of 2022.
Also called a blank check company, a SPAC is a shell company that raises money from investors and goes public with the sole intention of merging with a private company to go public. Once regulators approve the deal, the company that goes public replaces the SPAC on the stock market. Such mergers have become popular alternatives to traditional IPOs over the past few years, although they have been hit hard by this year’s market volatility.
Write to Amrit Ramkumar at [email protected]
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