In a surprising turn of events, the shell company that was set to merge with former President Trump’s media company has lost $467 million in funding. Digital World Acquisition Corp. announced this setback in a regulatory filing on Thursday. CEO Eric Swider confirmed that the remaining $533 million would be returned to investors, effectively terminating the private investment in public equity (PIPE) transaction. Trump Media & Technology Group, which owns Truth Social, however, sees this as a positive development. CEO Devin Nunes stated that it is in the best interest of TMTG’s equity holders to complete the merger as soon as possible, according to CBS News.
However, it is unclear how this funding loss will benefit TMTG. In fact, CBS suggests that it is a step backward for the potential merger. Without the PIPE, TMTG will only receive $293 million in cash from the special-purpose acquisition company’s initial public offering in September 2021, significantly less than anticipated, as reported by Reuters. Investors had the opportunity to retract their commitments due to multiple delays in the merger deadline caused by an investigation from US financial regulators. In July, DWAC agreed to pay $18 million to the Securities and Exchange Commission to settle antifraud violation claims related to its IPO, according to the Financial Times.
In an August amendment to the merger deal, DWAC requested the unwinding of the PIPE. Another change was the allocation of new shares in DWAC to Trump, giving him more voting power. Trump controlled 90% of TMTG as of February 2021. Swider’s statement in response to the PIPE cancellations emphasized the positive impact on the business combination process and mentioned TMTG’s reduced need for capital and commitment to a sustainable business model, as CBS reports. Reuters adds that DWAC or TMTG can choose to terminate the merger next month if their boards determine it would not benefit shareholders. (Read more Truth Social stories.)
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