Trump-linked SPAC shrinks amid uncertainty over deal closing

(Bloomberg) — Investors dumped shares of Digital World Acquisition Corp., the blank-cheque company slated to merge with Donald Trump’s social media company, after executives postponed a shareholder vote intended to get an extension for the completion of the deal — signaling uncertainty surrounding the ability of donors to get enough support.

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Executives at the special-purpose buyout firm adjourned the meeting to extend the deadline by up to a year to Thursday in an attempt to get retail shareholders to vote, a group that historically misses such events. The SPAC needs 65% of shareholders to support the expansion.

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

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

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

The SPAC gave itself a year to complete 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 by up to six months, however, that would cost the team millions of dollars as it would push cash into its trust account.

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

Retailers were talking about Digital World, however, they didn’t seem to be actively buying the dip. The company’s ticker was popular on the popular chatroom, 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 company 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 similar information the same week. Digital World said at the time that the grand jury is also seeking information from certain current and former TMTG staff.

CF Acquisition Corp. VI, a Rumble Inc. video platform. receiving SPACs, rose 8.4% ahead of a deadline for its shareholders to vote next week. Rumble has entered into a technology and cloud services agreement with Trump Media.

(Updates with additional details throughout.)

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