The special-purpose buyout firm trying to take Trump Media & Technology Group public will pay nearly $3 million to have three more months to complete the deal, narrowing an already narrow path to a merger.
Shares of Digital World Acquisition Corp.
added 2.8% to $24 a share on Friday after confirming late Thursday that it had failed to get investor approval for a one-year extension to its merger deadline. The stock has hovered between $20 and $25 most of this week.
The confirmation was expected after the SPAC suspended its shareholder meeting for two days on Tuesday and said in a filing that it was prepared to pay for the three-month extension.
Digital World Acquisition’s management may pay another $3 million in December for another three months to complete the merger. Many analysts say it could take longer than that to resolve investigations by the Securities and Exchange Commission and federal prosecutors into how the deal came about and communications between the two sides before the 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 quickly complete its review.”
The SEC declined to comment.
The SPAC and former President Donald Trump’s social media company, which runs Twitter alternative Truth Social, must still disclose a lot of information in regulatory filings that will be subject to SEC approval before shareholders can hold a final vote on the deal. approval of the agreement.
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 do something simple under their control and costing them money, analysts say — and a downside of having a stock driven by speculation from retail investors, because many of them are unfamiliar with shareholder meetings. The stock has fallen in recent weeks as the initial deadline approached.
The SPAC’s creators put the nearly $3 million into its trust account, which holds about $290 million.
Merger and liquidation deadlines are common for SPACs, which typically have about two years to work out a deal or have to return the cash they raised to shareholders. Digital World Acquisition CEO Patrick Orlando interrupted 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. He finally adjourned the meeting to October 10.
The blank check merger could give the former president’s company as much as $1.3 billion in cash. Mr. Trump recently told Truth Social that it does not need funding and hinted that the company could 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 corporation, a SPAC is a shell company that raises money from investors and goes public on a stock exchange with the sole intention of merging with a private company to take it public. After regulators approve the deal, the IPO replaces the SPAC on the stock market. Such mergers have become popular alternatives to traditional initial public offerings in recent years, though they have been hit hard by this year’s market volatility.
Write to Amrith Ramkumar at firstname.lastname@example.org
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It appeared in the September 10, 2022 print edition as “Trump Media SPAC Buys Three Months to Close Merger”.