Daily Management Review

SPAC That Merged With Trump's Venture Performs Better Than Others In Sector


Despite the regulatory threats facing the deal and investors now lambasting the overwhelming majority of such vehicles, stocks of the blank-check acquisition company that decided to merge with former President Donald Trump's social media venture have surpassed every other special purpose acquisition company (SPAC).
According to SPAC Research, Digital World Acquisition Corp, which merged with Trump Media & Technology Group Corp in October for $875 million, is currently the best performing SPAC stock ever.
On Friday, Digital World's stock closed at $73.12, well above its initial public offering price of $10. This implies that the combined business is worth around $13 billion, including debt.
This is despite the fact that TMTG has yet to launch its social networking app and the deal's regulatory hurdles.
Last month, Democratic U.S. Senator Elizabeth Warren asked Securities and Exchange Commission (SEC) Chairman Gary Gensler to look into the pending merger for possible securities law violations related to disclosure.
The SEC has been tight-lipped on whether or not it will take action. Last month, Digital World stated that it had received inquiries from the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), but did not elaborate on the nature of the inquiries.
The fact that most SPACs have underperformed financially highlights Digital World's stock surge, which has been fueled by Trump supporters and retail investors.
Furthermore, the performance of DWAC's stock has improved the average trading price of all 114 SPACs that have been announced but have yet to close deals.
According to SPAC Research, the average SPAC is now trading at $9.88 a share, below the average trust value of about $10.05.
SPACS have underperformed the broader market by 25% on average during the last decade, according to Jay Ritter, a professor at the University of Florida. Many of these deals' optimistic financial forecasts have come to naught.
"DeSPACs have continued to give negative average returns in a rising market. This pattern has continued in 2021," Ritter said.
Given the stock's growth, Digital World shareholders are almost certain to vote in favor of the acquisition if regulators approve it. According to persons familiar with the situation, Digital World plans to submit a proxy statement with specifics on the acquisition in February, establishing the groundwork for a vote in the coming weeks.
Trump's new social media app, Truth Social, will be ready to download on February 21, according to Apple Inc.'s App Store.
According to regulatory documents and Reuters calculations, Digital World CEO Patrick Orlando and other SPAC officials paid $11.8 million for founder and placement shares in the SPAC, which are now worth nearly $620 million.