Digital World Acquisition Corp. (NYSE: DWAC), which is taking former US President Donald Trump’s TMTG (Trump Media & Technology Group) public, has reported an exodus of some PIPE (private investment in public equity) investors after the deal deadline expired.
DWAC had previously lined up $1 billion in PIPE investment for TMTG. Now, in an SEC filing, it has said that it has lost $138.5 million in financing from these investors. The merger between TMTG and DWAC has been controversial since the beginning and the troubles have only continued to mount.
In its SEC filing, DWAC also changed its address to a UPS Store in Miami. The SPAC has so far failed to get the stockholder approval to increase the merger timeline. While it has been almost a year since the merger was announced, it hasn’t been completed so far.
There has been turmoil in the SPAC industry and Chamath Palihapitiya, also known as the “SPAC King” dissolved two of the black cheque companies which were sponsored by him.
The SPACs in question are Social Capital Hedosophia Holdings IV (NYSE: IPOD) and Social Capital Hedosophia Holdings VI (IPOF) which had raised $460 million and $1.15 million respectively in the IPO.
Before him, Bill Ackman dissolved his maiden SPAC which had raised over $4 billion and was the biggest SPAC IPO of all time. Ackman admitted that a lot of SPACs were hunting for merger targets which meant that the competition for quality assets is quite high.
DWAC Loses PIPE Investors Ahead of TMTG Merger
One of the former PIPE investors told CNBC that they pulled out of the PIPE deal because of the various legal troubles and the tepid popularity of Truth Social, the Twitter-lookalike social media app of TMTG.
The subscriber growth of Truth Social has been far from satisfactory and even Trump has just about 4 million followers there, which is way below the nearly 90 million Twitter subscribers he had before his account was banned.
While Truth Social is available on Apple, its Android launch got delayed. The App was made available for pre-order on Android but Google has barred it from the App store over content moderation issues.
The drama over the TMTG-DWAC merger is another controversy for Trump who is also reportedly eyeing running for the 2024 Presidential elections. Trump is still quite popular among conservative voters even as Biden’s popularity has fallen, partially because of the spiraling inflation.
Trump Fans Anyways Love the Stock
Meanwhile, in a world where almost all the SPACs as well as de-SPACs are trading below the IPO price, DWAC is still above the IPO price. DWAC joined the list of meme stocks as it soared to astronomical levels. It went on to hit an all-time high of $97 versus the IPO price of $10.
A lot of Trump supporters have been buying DWAC stock even as the overall sentiments towards SPACs have been quite negative. However, the merger has been controversial from the onset. The Financial Industry Regulatory Authority, SEC, and federal prosecutors are investigating the merger. Among others, they have sought information related to due diligence. SPAC sponsors have a fiduciary responsibility to get the best deal for stockholders.
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