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Digital World Acquisition Corp, the special purpose acquisition company (SPAC) set to merge with former U.S. President Donald Trump’s media and technology venture, announced this week that it will be refunding the remaining $533 million raised for the deal. This decision comes after some investors had already withdrawn $467 million of their commitments.
This marks the end of the private investment in public equity (PIPE) transaction, which would have provided Trump Media & Technology Group (TMTG), the operator of Trump’s Truth Social platform, with $1 billion as part of its merger with Digital World.
For context, a SPAC is a publicly traded shell company designed to raise capital for a merger with a private firm.
Digital World had raised the $1 billion PIPE in the previous year, but the merger with TMTG was not completed by the September 2022 deadline due to regulatory concerns raised by U.S. financial authorities regarding Digital World’s disclosures to investors. This gave PIPE investors the option to revoke their commitments.
TMTG CEO Devin Nunes stated in a press release that terminating the PIPE was “in the best interest of TMTG’s equity holders and completing our merger with DWAC as soon as possible.”
A TMTG spokesperson confirmed that ending the PIPE was “a key step toward completing our merger.” However, they did not address why this termination ahead of the merger was beneficial for TMTG.
An amendment to TMTG’s agreement with Digital World on August 9 called for the unwinding of the PIPE, which, in turn, grants Trump new shares in Digital World with enhanced voting rights.
As a result of unwinding the PIPE, Digital World will retain the $293 million in cash it initially raised during its IPO in September 2021, which is set to go to TMTG upon the merger’s finalization. This sum may diminish if investors opt for redemptions.
The TMTG spokesperson did not respond to queries regarding whether the company intends to raise additional funds. It was reported by Reuters in October last year that TMTG had previously secured $22.8 million in funding from private investors.
Digital World and TMTG have modified their merger agreement to allow either party to terminate the deal between October 31 and November 21 if their boards no longer believe the merger would benefit shareholders. As of a February 2, 2021 services agreement, Trump holds a 90% stake in TMTG.
Digital World has encountered various challenges since its October 2021 agreement with TMTG. It has been subject to investigations by the U.S. Department of Justice and the Securities and Exchange Commission, removed its CEO, and restructured its board.
In September, Digital World investors approved an extension of up to one year to conclude the TMTG deal, which had seen its deadline pushed back multiple times. It remains uncertain when or if Digital World will seek a shareholder vote on the TMTG merger, an essential step for its completion.
Shares of Digital World experienced a 2% drop on Thursday, falling to $15.54, significantly below their peak of approximately $97 per share in March 2022.
