Digital World Acquisition Corp. (DWAC), a business that plans to take over former President Donald Trump’s Truth Social platform, saw its shares almost triple in less than two weeks as the GOP candidate dominated the Republican Party nomination race.
DWAC is a special purpose acquisition vehicle (SPAC)—a company without any commercial operations and created only to raise capital via an IPO to eventually acquire or merge with an existing company. DWAC is working towards merging with the Trump Media & Technology Group (TMTG), the parent firm of the former president’s social media platform Truth Social.
On Tuesday, DWAC was trading at $50.75—a 193 percent jump from $17.32 less than two weeks back on Jan. 12. The last time the stock exceeded $50 was in April 2022. Trading volume has also seen a massive jump. On Jan. 12, trading volume was at 164,000, which spiked to 30 million on Tuesday.
“Now that Trump appears to be the de facto Republican candidate, that momentum is naturally going to carry over,” Kristi Marvin, a former investment banker and founder of SPACInsider which collects data on the SPAC market, told The New York Times. “In a way, it’s a barometer for how he’s doing in the race.”
“The market has gone full bonkers,” Julian Klymochko, chief executive officer of Accelerate Financial Technologies Inc. which has a SPAC-focused fund, said to Bloomberg.
“Shares do not reflect any fundamental intrinsic value of Truth Social, but they are more of a ‘trading sardine,’ or tool of speculation,” he said.
Other Trump-linked company shares have also increased. Rumble, a video-sharing platform popular with conservatives, saw shares jump from $3.39 to $6.50 on Jan. 23.
The share price of Phunware, a software developer that was hired by President Trump’s 2020 campaign to build a phone app, increased from $0.08 to $0.43 during this period.
Merger Deal
DWAC was founded in 2020 with the purpose of effecting a “merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.”The merger deal has faced several regulatory issues over the past years and is still being worked through. Last month, DWAC said it was expecting the merger to be completed as soon as the first quarter of this year.
Between February 2021 and June 2023, TMTG had used $35.36 million out of the $37.96 million raised through convertible promissory notes. The notes have terms between 18 and 36 months, with interest accruing at 5–10 percent annually.
“As of June 30, 2023, and December 31, 2022, management has substantial doubt that TMTG will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes previously issued by TMTG,” the filing said.
Only by completing its merger with DWAC would TMTG gain access to enough capital to pay off its debts. “TMTG believes that it may be difficult to raise additional funds through traditional financing sources in the absence of material progress toward completing its merger with Digital World,” it said.
The filing also explicitly admits that Truth Social’s value is directly linked to its association with President Trump. If the former president “were to cease to be able to devote substantial time to Truth Social, TMTG’s business would be adversely affected,” it said.
In September, DWAC shareholders voted to extend the merger deadline with TMTG to Sept. 8, 2024. Once the merger is completed, TMTG will have access to $290 million in funds held by DWAC as well as an extra $1 billion that other investors have committed to the combined firm.
DWAC and TMTG are now looking forward to the SEC completing its review of their merger agreement, a recent version of which was filed with the agency on Monday.
The submitted document also included a version of the proxy ballot that DWAC shareholders will have to cast in order to approve the merger deal.
