DWAC shares up 5% as Trump Media seeks $1bn investment
18:34, 2 December 2021
Digital World Acquisition – the blank-cheque firm seeking to merge with former president Donald Trump’s social media venture – traded up as much as 21% on Thursday following reports that the company is seeking to raise an additional $1bn by selling shares to hedge funds and wealthy family offices.
Trump Media and Technology Group already stands to raise some $293m in a merger with special purpose acquisition company Digital World Acquisition, and is now seeking to raise the additional funds through a private investment in public equity (PIPE) deal, according to a report from Reuters.
The SPAC deal has yet to close but is expected to fetch the customary $10 per share giving Trump Media an initial enterprise value of $875m. The new shares from the PIPE deal would come at a much higher price closer to where the shares of Digital World Acquisition have traded since going public in September.
Market reaction
Digital World Acquisition traded as high as $53.97 per share on Thursday, up from the prior day’s close of $44.35. By mid-day, that price settled closer to $46.40 for a 4.60% gain on the day.
At one point in October, the shares soared as high as $175 per share but have dropped dramatically since the initial frenzy.
The PIPE shares are expected to be sold at a 20% discount of their 10-day, volume-weighted average price.
Should Trump Media succeed at raising the $1bn it would value the new combined company at close to $3bn up from its current market capitalisation of $1.68bn.
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TRUTH Social
Trump Media is raising all this money despite not having yet launched its social media platform called TRUTH Social, which is expected to challenge Twitter.
The social media platform missed its own deadline to make a beta version of the platform available to users by the end of November, and the uncertainty surrounding the product is keeping some investors away.
Other investors are reluctant to back the deal after Trump was banned from social media platforms Twitter and Facebook for encouraging his supporters to participate in the 6 January attack on the US Capitol, while promoting unsubstantiated claims of widespread fraud in last year’s presidential election.
For example, Saba Capital Management and Lighthouse Investment Partners backed the launch of Digital World Acquisition but said they sold their shares to distance themselves from the Trump deal.
Trump Media also faces possible regulatory scrutiny after US Senator Elizabeth Warren publicly called on the US Securities and Exchange Commission to investigate the company for potential violations of securities laws. It is unknown if the SEC is following up on that request.
Clarification: An earlier version of this story was modified to better distinguish Digital World Acquisition from Trump Media in both the headline and lead.
Read more: DWAC DPO: Will the SPAC price scale new highs?
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