Digital World Acquisition Corp’s share price plunges as deal hits buffers

DWAC’s share price is down 52% this year and on September 6 the share price fell 11% – Photo: Shutterstock.

This is the case that has been on everyone’s lips and it is certainly not fake news. Former US President Donald Trump wants his company Trump Media & Technology Group (TMTG) to go public.

The company that is ready to help Trump is Digital World Acquisition Corp (DWAC), a special purpose acquisition company (SPAC), which wants to merge with TMTG. But the deal is a long way from being signed, sealed and delivered. It appears shareholders are in limbo as to whether to approve it and DWAC’s stock price is feeling the pressure.

DWAC the stock price is down 52% this year, and on September 6, the stock price fell 11%. On the same day, Reuters reported that the blank check acquisition company had not garnered enough shareholder support to delay the merger – by a year – with Trump’s social media company, Truth Social.

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Digital World Acquisition Corp (DWAC) stock price chart

DWAC shareholders are hesitant about the proposed merger with Trump Media

DWAC shareholders may be hesitant about his plan to take over the company from the former chairman, TMTG Public. Reputational risk, perhaps? Anyway, the meeting to finalize the merger has been postponed, although media pundits believe it is done. The DWAC will now have another meeting of shareholders on October 10 to allow voting to continue.

The meeting when it happens will decide the fate of a $1.3bn (£1.13bn) cash injection from DWAC’s public offering and potential listing of TMTG on the stock exchange.

The deal has been clouded by controversy amid civil and criminal lawsuits surrounding the deals, as well as Trump’s own scandals.

Last month, FBI agents searched Trump’s Mar-a-Lago estate in Palm Beach, Florida. The search was part of a larger investigation into Trump’s unlawful removal and destruction of White House records after his presidency. As a result, the politician and businessman faces a series of investigations and lawsuits.

Could the deal still happen?

Despite these issues, experts believe the deal will go ahead and Trump will ultimately triumph.

Senior Strategist Matthew Kennedy, who works for Renaissance Capital, a provider of pre-IPO research and IPO-focused ETFs (IPOs), told Capital.com:

“Ongoing investigations by the Department of Justice (DOJ) and the SEC make it impossible to know if the merger will take place. I expect it will: it would take serious wrongdoing or misrepresentation to cancel the merger agreement.

“If the regulator terminates the deal or forces it to do so via indefinite deadlines, the stock would be worth just over $10, because the confidence is returned to shareholders,” Kennedy added.

Kennedy pointed out that since the deal was announced last year, DWAC traded like a meme stock.

DWAC facing liquidation

“SPAC trading has been mostly disconnected from its fundamentals. But fundamentally, buying a pre-revenue media company with a multi-billion dollar valuation comes with a lot of risk,” Kennedy said.

Without shareholder support, DWAC could face liquidation and is expected to return all the money it raised in its September 2021 initial public offering (IPO), according to Reuters.

“We are working diligently to record all of the votes that continue to come in from our shareholders and our adjournment of this meeting to allow shareholders more time to vote,” he added. DWAC CEO Patrick Orlando said.

Renaissance Capital (IPO) stock price chart

DWAC CEO urges yes to merger

DWAC announced this month that ARC Global Investments II, an Orlando-controlled group, launched a three-month integrated extension by depositing $2.8 million into DWAC’s trust account.

The filing, which is equivalent to 10 cents per share, pushes the merger deadline to Dec. 8. In its statement, DWAC rallied investors to vote in favor of the one-year extension.

Orlando said, “We are very pleased to announce that our sponsor has contributed an additional $2.875 million in funds to the Trust Fund for the benefit of shareholders of Digital World Acquisition Corp. These funds not only provide for an initial three-month extension which gives give us more time to advance our business combination efforts.”

“In order to get as many votes counted as possible from our valued shareholders, we are adjourning our meeting to Columbus Day 2022, which falls on Monday, October 10.e This year. We remind all shareholders to vote and urge shareholders to vote “FOR” the one-year extension, which we believe will put Digital World in the best position for our valued shareholders. We are ultimately looking at the option of extending up to 12 months to allow Digital World sufficient time to complete a business combination that our management and board believe will be the most additive to shareholder value.”

Further reading

Karen J. Nelson