Digital World Acquisition Corp. (DWAC) stock fell Friday as shareholders of the special purpose acquisition company, aiming to take former President Donald Trump’s tech and social-media platform public, are set to meet Monday to determine whether there is support to extend the deadline to complete the merger.
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DWAC’s original deadline to complete its merger with Trump Media and Technology Group, the parent of the conservative social-media platform Truth Social, had been last month. However, a Securities & Exchange Commission investigation of the deal has delayed proceedings. On Sept. 8, DWAC adjourned the shareholder vote on whether to approve a deadline extension, setting Monday as the new date.
Without shareholders completing a vote last month, the SPAC’s sponsor, ARC Global Investments, contributed about $2.9 million to extend the merger deadline until Dec. 8, according to federal filings. DWAC management is providing shareholders an opportunity to extend the deadline until Sept. 8, 2023.
DWAC stock dropped 1.5% to 17.32 during Friday stock market trading. Shares are down 90% from their Oct. 22 high of 175, when news of the Trump merger deal first broke.
Vote Or DWAC Liquidation
Aug. 25 SEC filings showed DWAC asked shareholders to approve an extension for it to complete its business merger.
DWAC had set the vote for Sept. 6 and warned investors that if the delay to September 2023 was not granted, the company could potentially cease operations and liquidate shares.
“Without the extension, the board believes that there is significant risk that we might not, despite our best efforts, be able to complete the business combination on or before the termination date,” the company wrote in its Aug. 25 federal filing.
Filings also show the SPAC hemorrhaging cash. In an SEC document last month, DWAC revealed that between Sept. 19 and Sept. 23 it had received termination notices from private investment in public equity (PIPE) investors representing around $139 million.
This comes after DWAC reported in its quarterly report on Aug. 23 that it had lost $6.2 million in the first half of the year.
SEC Probes DWAC
DWAC announced in October 2021 it intended to merge with Trump Media and Technology Group, with the aim of taking Trump’s company public. However, the SEC began to investigate DWAC’s business dealings in December.
After the merger announcement, DWAC stock rose but observers were skeptical about the speed at which the deal came together. Shares of Digital World began trading on Sept. 30, 2021. Then the stock briefly spiked more than 1,600% in the two days following the Trump media merger announcement, on Oct. 20, 2021.
Shares retreated from those highs, but traded as much as 914% above the September, 2021, launch price as recently as March.
In late June, a DWAC SEC filing revealed a federal grand jury in the Southern District of New York had subpoenaed the company’s board members seeking more details on the merger deal. At the time, DWAC warned the Justice Department and SEC investigations risked slowing or ending the merger altogether.
The New York Times reported Trump and DWAC CEO Patrick Orlando had discussed a deal months before the SPAC went public.
DWAC Stock And Trump’s Social Media
DWAC stock dropped 5% Tuesday after news broke that Elon Musk had shifted course and that his $44 billion Twitter (TWTR) acquisition was once again on. This raises the possibility that Trump could return to Twitter, potentially before November’s midterm elections.
In addition, on Thursday evening, Musk tweeted that Tesla (TLSA) was starting production on the Tesla Semi tractor trailer trucks. Deliveries to PepsiCo (PEP) were set to begin on Dec. 1. Musk said the electric semi trucks will have a 500-mile range per charge.
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Truth Social launched after Twitter shut down Trump’s Twitter account following the Jan. 6 riot at the U.S. Capitol last year. The Trump-backed social media app launched in February, with a number of users citing glitches and difficulties creating accounts.
A return to Twitter could redirect a large portion of Truth Social’s audience to the more mainstream channel. Also, in an Aug. 25 federal filing, DWAC said a potential risk to the success of its business merger is Trump’s popularity, or lack thereof.
“If President Trump becomes less popular or there are further controversies that damage his credibility or the desire of people to use a platform associated with him,” that could affect the deal, DWAC wrote in the filing.
Last month, DWAC then filed a copy of a Sept. 3 Truth Social post from Trump. The former president said the social media platform is “doing really well” but that the SEC is attempting to prevent the SPAC from completing the deal.
“Who knows? In any event, I don’t need financing, ‘I’m really rich!’ Private company anyone???” Trump said.
Please follow Kit Norton on Twitter @KitNorton for more coverage.
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Source: https://www.investors.com/news/dwac-stock-falls-ahead-of-trump-deadline-vote-on-monday/?src=A00220&yptr=yahoo