Digital world stocks are rising as the Republican primary field shrinks
Shares of Digital World Acquisition Corp., the cash-rich shell company that plans to merge with former President Donald Trump's social media company, rose as much as 70 percent on Monday, a day after Florida Governor Ron DeSantis withdrew from the race for the Republican presidential nomination and brought Trump even closer to securing it.
The jump reflected investor enthusiasm around Trump Media & Technology Group, the beleaguered company that has been trying since 2021 to merge with Digital World, a special purpose acquisition company. Digital World raised about $300 million in its September 2021 IPO — money the Trump company needs to run its operations.
Shares of Digital World had already more than doubled since Trump won the Iowa caucuses on January 15. At around $44 per share, the SPAC is trading at its highest share price since spring 2022.
“Now that Trump appears to be the de facto Republican nominee, that momentum will obviously carry over,” said Kristi Marvin, a former investment banker and founder of SPACInsider, which collects data on the SPAC market. “In a way it's a barometer of how he's doing in the race.”
The surge in shares of Digital World, which is majority owned by about 400,000 retail investors, comes as the long-delayed merger with Trump Media, the parent company of Truth Social, draws closer. The online platform has become Trump's personal megaphone for criticizing his critics, political opponents and state and federal prosecutors pursuing criminal and civil cases against him.
Truth Social, which has about seven million users, brought in about $3.3 million in mostly advertising revenue in the first nine months of 2022, according to a filing with the regulator. During that same period, Trump Media suffered approximately $49 million in losses. The company was short on cash at the end of September and has used up most of the $37 million in private funding it has raised since 2021, according to the filing.
Trump Media's accountants have said the social media company will not be able to continue as a going concern without an influx of cash. That makes closing the deal with Digital World essential for Mr. Trump, who will be the company's largest individual shareholder after the merger.
A spokeswoman for Trump Media did not return a request for comment.
The upcoming merger between Digital World and Trump Media, announced in October 2021, had been delayed by a Securities and Exchange Commission investigation into early deal talks between the companies leading up to the SPAC's initial public offering.
Last summer, Digital World agreed to pay an $18 million fine to the SEC and review some of its corporate filings after securities regulators said those early deal talks with Trump Media had ignored merger laws for SPACs. An investigation by federal prosecutors that led to the filing of insider trading charges against three investors linked to Digital World had also held up the deal.
With those investigations out of the way, Digital World and Trump Media said in December that the companies hoped to complete the merger by the summer. end of March. But the SPAC is still waiting for the SEC to complete its review of the merger agreement — known as an S4 — with Trump Media. On Monday, Digital World has submitted its third revision of the merger agreement, which included a version of the proxy ballot. Shareholders will be asked to approve the deal.
according to Digital World last week it was talk to some investors about raising another $50 million to finance the company post-merger. The company has had discussions with these investors – mainly hedge funds – about selling interest-bearing promissory notes that can be converted into company stock, but nothing has come of it yet.