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Trump merger partner Digital World falls to about $16 after hitting $97 in early 2022

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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 on this picture illustration taken February 21, 2022.

Dado Ruvic | Reuters

Shares of Digital World Acquisition Corp. fell this week as the corporate missed a key deadline to carry 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. However the cope 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 generally known as PIPE, which might fund Trump Media after the merger. Nonetheless, Tuesday marked the expiration of those investors contractual obligations to the deal, allowing them to drag their funding.

Late Friday, DWAC disclosed in a regulatory filing that, between Monday and Friday, it received termination notices from PIPE investors representing about $138.5 million of the financing.

PIPE investors are given convertible preferred shares, which may be transferred into common stock at a reduction. By converting and selling these shares, these investors even have the ability 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 removed from the one 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 a couple of deal prior to the merger announcement. The Justice Department can be probing the deal.

As well as, Trump himself is facing mounting legal pressures. A lawsuit alleging widespread fraud from Recent York Attorney General Letitia James is just one other in an already sizable pile of legal actions against the previous president. The previous president is concurrently under investigation for the removal of sensitive documents from the White House, his role within 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 an answer.

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

DWAC needs to purchase more time to get shareholders to approve delaying the merger by as much as a yr. DWAC CEO Patrick Orlando made a $2.8 million deposit to increase the merger deadline to December. A shareholder vote is required for the yearlong extension the corporate is aiming for, but DWAC has been unable to rally its many retail investors to approve the extension to date. The subsequent shareholder meeting is scheduled for Oct. 10.

Amid these mounting pressures, Trump Media issued an announcement saying it might pursue legal motion 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 plenty of others who’re simply following the foundations and attempting to expand a successful business,” Trump Media said.

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