• Ted Yeates

Follow the money: Trump’s media merger with SPAC proves lucrative for some



Donald Trump’s social media company, Trump Media & Technology Group (TMTG), announced on 20th October 2021 it was going public via a merger with a special purpose acquisition company (SPAC), Digital World Acquisition Corp. Following the news, shares in the SPAC jumped by over 350 per cent in a single day.


Little is known about TMTG aside from its plans to form a social media platform in early 2022, TRUTH Social, alongside a video streaming and news platform. The premise behind the start-up is to “stand up to the tyranny of Big Tech” according to Trump who was banned from the majority of social media platforms following the violence at the U.S. Capitol on 6 January 2021.


Hedge funds who participated in the IPO of Digital World Acquisition Corp.(DWAC), which took place on 3 September 2021 for $10 per share, earned hundreds of millions in gains because of the jump in the share price. These hedge funds’ investments were never at risk as they could always redeem their shares for $10 a piece. Additionally incentives to invest included a partial warrant per share, a guaranteed redeemable value of $10.20 per share in the future and a promise of 150,000 shares at $0.0029 per share. The $0.0029 share price is the same as that which Patrick Orlando, the SPAC’s sponsor, and his team bought shares for. These sweeteners were used to entice hedge funds to invest, something DWAC needed in order to gain crucial credibility. The result was an investment opportunity with almost no risk of major losses, whilst offering up the potential to win big, which it did.


SPACs list themselves on exchanges to raise capital with the intent of using that capital to complete a reverse merger with a yet to be identified private company. A reverse merger occurs when a private company merges with a public shell company. Through this process SPACs provide private companies such as Trump’s media enterprise with an alternative and simplified way to go public.

The red-hot market for SPACs, which resulted in the 2020 listings record being broken within the first quarter of 2021, has since cooled off as the products fall out of favour with investors.




This is reflected in the increasing redemption rates which reached 52.4 per cent in the third quarter of 2021. However, since DWAC shares closed on 3 November 2021 at $63.25 it would make little sense for investors to redeem them for $10 rather than selling them on the secondary market. Therefore, TMTG is likely to receive the full $280 million in cash DWAC raised from investors net of fees.


The planned deal, which is yet to be approved by DWAC shareholders and regulators, would have given TMTG a valuation of between $875 million and $1.7 billion depending on the stock’s performance post-merger. However, the current market price implies a far higher valuation of Trump’s business. It raises the question of how SPAC investors, who are given limited information about the target company, can assess its value. The announcement of the TMTG merger included zero financial information and investors are currently paying around $60 per share for a shell company with just $7.62 of cash per share to invest in TMTG. The low amount of cash per share is due to the various special deals and sweeteners offered to insiders and hedge funds as well as fees paid to underwriters. The current owners of Trumps group would receive almost $5.5 billion if shares remained at $62.25 as well as a further 40 million shares if the shares remain above $30 over the first 6 weeks post-merger, further diluting the SPAC investor holdings and enriching owners of TMTG.


Participating hedge funds, underwriters, Orlando and his team and owners of TMTG have already or are set to benefit financially from the TMTG merger gravy train. Whether retail and other investors in DWAC will profit off their involvement in the merger is highly speculative and waits to be seen.

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