Trump-linked Digital World Acquisition Corp shares are now around $16 after hitting $97 earlier this year

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The Truth social network logo is seen on a smartphone in front of a display of former U.S. President Donald Trump in this picture illustration taken February 21, 2022.
Dado Ruvic | Reuters

Shares of Digital World Acquisition Corp. fell this week as the company missed a key deadline to hold on to about $1 billion in financing for its proposed merger with former President Donald Trump’s media company.

DWAC, which is a special purpose acquisition company, or SPAC, has been set to be the vessel to take Trump Media and Technology Group public. But the deal with Trump’s firm has run into several financial and legal obstacles.

At its 2022 peak, DWAC’s stock traded at $97. Now, its share price sits around $16 as markets slide, the appetite for SPACs dries up and Trump faces mounting legal peril. The stock fell about 3% Friday.

DWAC secured $1 billion in financing from private investors in public equity, also known as PIPE, which would fund Trump Media after the merger. However, Tuesday marked the expiration of these investors contractual obligations to the deal, allowing them to pull their funding.

These investors are given convertible preferred shares, which can be transferred into common stock at a discount. By converting and selling these shares, PIPE investors also have the power to significantly dilute the holdings of other investors including former president Trump.

Trump Media, DWAC and the PIPE investors didn’t immediately return a request for comment.

Losing the $1 billion in financing is far from the only woe facing this deal and its involved parties. The merger is under investigation by the Securities and Exchange Commission for possible securities violations involving discussions about a deal prior to the merger announcement. The Justice Department is also probing the deal.

In addition, Trump himself is facing mounting legal pressures. A lawsuit alleging widespread fraud from New York Attorney General Letitia James is just another in an already sizable pile of legal actions against the former president. The former president is simultaneously under investigation for the removal of sensitive documents from the White House, his role in the Jan. 6, 2021, Capitol riot, and his push to overturn 2020 election results.

His Truth Social app, which was founded after the ex-president was banned from Twitter after the events of Jan. 6, is currently barred from the Google Play store for violating Google’s content moderation policies. Google and Truth Social said this week they were still working on a solution.

If the merger does go through, it would provide about $300 million to Trump’s media firm without the $1 billion in PIPE investments. But even to get that $300 million will require navigating several more hurdles.

DWAC needs to buy more time to get shareholders to approve delaying the merger by up to a year. DWAC CEO Patrick Orlando made a $2.8 million deposit to extend the merger deadline to December. A shareholder vote is required for the yearlong extension the company is aiming for, but DWAC has been unable to rally its many retail investors to approve the extension thus far. The next shareholder meeting is scheduled for Oct. 10.

Amid these mounting pressures, Trump Media issued a statement saying it would pursue legal action against the SEC for unduly obstructing the deal, blaming the “weaponization and politicization” of the Securities Exchange Commission.

“This inexcusable obstruction, which directly contradicts the SEC’s stated mission, is damaging investors and many others who are simply following the rules and trying to expand a successful business,” Trump Media said.

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