Shares of Digital World Acquisition Corp., the cash-rich shell company that plans to merge with former President Donald Trump’s social media company, surged as much as 70 percent on Monday, a day after Florida Governor Ron DeSantis dropped out of the race. the Republican presidential nomination and brought Mr Trump even closer to achieving it.
The surge reflects investor enthusiasm for Trump Media & Technology Group, a troubled company that has been trying to merge with Digital World, a special purpose acquisition company, since 2021. Digital World raised about $300 million in a September 2021 initial public offering – the money Trump Company needs to run its business.
Digital World’s shares had already more than doubled since Mr Trump won the Iowa caucuses on January 15. At around $44 per share, the SPAC is trading at its highest stock price since spring 2022.
“Now that Trump actually appears to be the Republican nominee, that momentum is going to naturally carry over,” said Christy Marvin, a former investment banker and founder of SPACInsider. “In a way, it’s a barometer of how he’s performing in the race.”
The surge in shares of Digital World, which is largely held by about 400,000 retail investors, comes as Truth Social’s parent company is closer to completing its long-delayed merger with Trump Media. The online platform has become Mr Trump’s personal megaphone to criticize his critics, political opponents and state and federal prosecutors pursuing criminal and civil cases against him.
Truth Social, which has about seven million users, made about $3.3 million in mostly advertising revenue during the first nine months of 2022, according to a regulatory filing. Over the same period, Trump Media lost approximately $49 million. The company had little cash as of the end of September, according to the filing, and has exhausted most of the $37 million in private financing it has raised since 2021.
Trump Media’s accountants have said the social media company will not be able to continue as a “going concern” without cash flow. This makes it necessary for Mr Trump to complete the deal with Digital World, which would be the company’s largest single shareholder after the merger.
A Trump media spokesperson did not respond to a request for comment.
The pending merger between Digital World and Trump Media, announced in October 2021, was delayed by a Securities and Exchange Commission investigation surrounding initial deal negotiations between the companies ahead of the SPAC’s initial public offering.
Last summer, Digital World agreed to pay an $18 million fine to the SEC and amend some of its corporate filings after securities regulators said negotiations of an early deal with Trump Media may have jeopardized the merger of controlling SPACs. Had violated laws. An investigation by federal prosecutors that led to insider trading charges being filed against three investors associated with Digital World also halted the deal.
With those investigations out of the way, Digital World and Trump Media said in December that the companies expected the merger to be completed. end of March, But the SPAC is still waiting for the SEC to complete its review of the merger agreement with Trump Media — known as S4. on Monday, Digital World filed its third amendment The merger agreement, which includes a version of the proxy ballot, will be asked to be cast by shareholders to approve the deal.
digital world said We were talking last week Some investors reported raising an additional $50 million to finance the company after the merger. The company has talked with investors – primarily hedge funds – about selling interest-bearing promissory notes that convert into company stock, but nothing has happened yet.