Digital World Acquisition in an 8-K said it continues work on eliminating the PIPE fuynding from its deal with Trump Media & Technology Group. The original $1 billion PIPE commitment has been reduced to $515.5 million as of Dec. 22, the SPAC said.
Digital World in October announced it was working to eliminate the PIPE altogether. Both the SPAC and Donald Trump’s social media company spun the news as a positive development, which raised eyebrows among many observers.
In the course of discussions with PIPE investors to terminate their commitments, some of the remaining PIPE investors and Digital World “tentatively explored an alternative arrangement involving convertible promissory notes as a possible substitute for the original PIPE commitments,” the SPAC noted in the new filing.
The potential notes would be interest-bearing and mature on the anniversary of the business combination’s closing. In addition, the parties considered the possibility that any notes could be convertible into units based on the aggregate of the principal amount and any accrued interest, divided by a hypothetical conversion price of $8, rounded to the nearest full unit. Each unit might include one share and half a warrant, which could be similar to placement warrants. The parties also considered the likelihood that the note would be subject to negative covenants and contain registration rights. Any such potential transaction could be valued up to $50 million and would be contingent on the remaining PIPE investors and the SPAC being able to agree to commercial and legal terms.
Absent any other funding, 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 — a significant reduction from the $1.2 billion at deal announcement. Read more.
