Digital World Acquisition Corp. (DWAC) shares increased Wednesday after plunging Tuesday on news reports that shareholders of the special purpose acquisition company do not support approving a deadline extension for the attempted SPAC merger with former President Donald Trump’s tech and social-media platform.
Reuters reported Monday evening that so far not enough shareholders had voted in favor of endorsing a one-year extension to complete the merger deal. The vote was set to be completed Tuesday, but the shareholders meeting ended quickly and was adjourned until Thursday.
In a federal filing Tuesday, DWAC said that if shareholders do not approve the extension, its sponsor ARC Global Investments would contribute about $2.9 million to extend the deadline until Dec. 8, 2022.
DWAC stock increased 3.5% to 22.90 early Wednesday during market trading. This comes after shares sank around 2o% early Tuesday before ending the day down 10.6%.
DWAC is down nearly 90% from its Oct. 22 high of 175. DWAC is at the lowest level since Oct. 21, when news of the Trump merger deal first broke.
On Aug. 25 federal exchange commission filings showed DWAC was asking shareholders to approve an extension for it to complete its business merger with Trump Media and Technology Group, or TMTG.
Trump Media and Technology Group is parent of the conservative social-media platform Truth Social.
Vote Or DWAC Liquidation
DWAC had set the vote for Sept. 6 and warned investors that if the delay to September 2023 is not granted, the company will 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.
The blank-check company added investors could redeem outstanding common stock at $10.20 per share until the time of the meeting. After the meeting, stock prices would be reassessed according to then-current amounts in the company’s trust account.
In its quarterly report on August 23, DWAC also reported it had lost $6.2 million in the first half of the year.
SEC Probes DWAC
DWAC announced in October it intended to merge with Trump Media and Technology Group, with the aim of taking Trump’s company public. However, the U.S. Securities and Exchange Commission began to investigate DWAC’s business dealings in December.
After the merger announcement, DWAC stock increased. However, observers were skeptical about the speed at which the deal came together. Shares of Digital World began trading on Sept. 30.
In late June, a DWAC federal 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 Orlando had discussed a deal months before DWAC went public. Those discussions may have violated securities law.
DWAC And Trump’s Social Media
Truth Social was launched after Trump was banned from Twitter (TWTR), following the Jan. 6 riot at the U.S. Capitol last year. Recent congressional hearings on the riots have put more focus on the former president’s actions during that time.
The Trump-backed social media app launched in February, with a number of users citing glitches and difficulties creating accounts.
In its Aug. 25 federal filing, DWAC said a potential risk to the success of its business merger is Trump’s popularity.
“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, and from which he will derive financial benefit, TMTG’s results of operations, as well as the outcome of the proposed business combination, could be adversely affected,” DWAC wrote in the filing.
On Tuesday, DWAC 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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