Digital World Acquisition, the SPAC trying to take Trump Media & Technology Group public, today said it is working to cancel PIPE subscriptions on the deal. The PIPE that once stood at about $1 billion is down to $533 million, the SPAC said, and Digital World is looking to cancel the rest.
Both sides presented the news as a positive development.
The PIPE investors had the right to terminate their subscription agreements at any time if the deal had not closed by Sept. 20, 2022. Some of the original PIPE investors pulled out a year ago, taking $138.5 million with them out of the initial $1 billion.
Today’s press release does not make it clear whether Digital World persuaded some of the former PIPE investors to cancel or if they walked away of their own accord.
“We are very grateful to the PIPE Investors who showed their support to DWAC and TMTG throughout the PIPE process and in the past two years as we continue to work toward consummating the Business Combination. We are confident that with these recent cancellations the PIPE Investors have again demonstrated their overall understanding of the closing conditions in the Merger Agreement, the regulatory landscape, and most importantly, demonstrated their support in seeing this merger through,” said Digital World CEO Eric Swider.
“Today’s announcement is an important step towards eliminating the PIPE — which TMTG believes would be in the best interest of TMTG’s equity holders — and completing our merger with DWAC as soon as possible.” said TMTG CEO Devin Nunes.
Cancellation of the PIPE would leave Digital World with its approximately $308 million cash in trust, less about $39 million in anticipated expenses connected to the Trump Media deal. That would supply Trump’s company with about $269 million at closing — quite a plunge from the $1.2 billion at deal announcement two years ago.
Digital World has missed key deadlines recently, following deal tweaks in August. The SPAC had the right to terminate the deal by Sept. 30, and since it did not, an updated S-4 was required to be filed by Oct. 9. That didn’t happen, either, which sets up the opportunity for Trump Media to walk away from the deal by tomorrow.
If the deal collapses, Digital World would be off the hook for an $18 million penalty levied by the SEC against the SPAC in July for “misleading investors.” Shareholders last month voted to extend the SPAC’s completion deadline until September 2024.
Additionally, Digital World today said its unaudited quarterly financial statements from last year “should also no longer be relied upon” because of a “material weakness” in internal accounting practices. This follows a similar announcement in May about its audited 2022 quarterly reports. Read more.
