The company missed a key deadline to hold on to about $1 billion in financing for its proposed merger with former President Donald Trump's media company
Trump Media and Technology Group is going to be taken public by DWAC. The deal with Trump's firm has run into problems.
DWAC's stock peaked at $97. As markets slide, the appetite for SPACs dries up, and Trump faces mounting legal peril, its share price is sitting at $16. Friday was a bad day for the stock.
In order to fund Trump Media after the merger, DWAC secured $1 billion in financing from private investors. The investors contractual obligations expired on Tuesday, which allowed them to pull their funding.
These investors can convert their preferred shares into common stock at a discounted price. PIPE investors have the power to convert and sell these shares to reduce the holdings of other investors including former president Trump.
The PIPE investors did not return a request for comment.
The $1 billion in financing is not the only woe facing this deal. The merger is being investigated by the Securities and Exchange Commission for possible violations of securities laws. The Justice Department is looking into the matter.
Legal pressures are on Trump. There are many legal actions against the former president and he is accused of widespread fraud by a lawsuit. The former president is being investigated for removing sensitive documents from the White House, his involvement in the Capitol riot, and his push to overturn 2020 election results.
The Truth Social app was banned from the Play store after it was found to be in violation of the guidelines for moderation. The two companies said they were still working on a solution.
Without the $1 billion in PIPE investments, the merger would give $300 million to Trump's media company. It will take more than one hurdle to get that $300 million.
The merger needs to be delayed by up to a year. The merger deadline was extended by the DWAC CEO. DWAC has been unable to get retail investors to approve the extension due to the requirement of a shareholder vote. There is a shareholder meeting in October.
Trump Media said in a statement that it would take legal action against the SEC for obstructing the deal.
Trump Media said that the obstruction is damaging investors and others who are simply following the rules.
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