'Nail in the coffin' for Trump's Truth Social after nearly $200M investment cancelled
Donald Trump's shell company that aimed to take his media company public to the U.S. Stock Exchange is returning donor money, Reuters reported Thursday. It means they intend to "cancel all outstanding private investment in public equity (PIPE) investments."
Trump had a SPAC, a Special Purpose Acquisition Company, which is a time-limited (2 years) shell company that is publicly traded with the sole purpose of taking a private company public. He named it the Digital World Acquisition Corp (DWAC) and it planned to merge with Truth Social. Now that might be on hold.
The company announced that they're refunding $533 million that they raised from investors. The cash was meant to be an infusion for the deal, but some investors were already backtracking, leading to commitments being cut to $467 million.
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"The development is the nail in the coffin of the $1 billion investment that DWAC (DWAC.O) had raised for the merger with Trump Media & Technology Group (TMTG), which runs the Truth Social platform," said Reuters. "It raises further doubts about whether the former U.S. president will go ahead with the deal, now that TMTG no longer stands to receive $1 billion if and when it closes."
It essentially means, that out of the $1 billion in investment commitments, Trump has lost $533 million.
The Securities and Exchange Commission (SEC) cracked down on the SPACs after there were many details throughout 2020 and 2021 that concerned investors that they were getting a "raw deal," a July report described.
In the Forbes report Thursday, the publication noted that the new filing revealed that Trump lost nearly $200 million in the prior investment commitments in less than a year. The total loss was $191.5 million.
The companies are spinning it as a positive for them.
Devin Nunes, the Trump Media CEO and former Republican member of the House, swears abandoning the commitments is an “important step…in the 'best interest' of shareholders that wanted to complete the merger 'as soon as possible.'"
“Despite how others may seek to characterize the PIPE commitment cancellations, we want our shareholders to understand that these cancellations are a positive development in our ability to consummate the business combination,” Digital World Acquisition Corp. CEO Eric Swider said in a statement.
Forbes reported that they also said on Thursday "its unaudited quarterly financial statements from last year 'should also no longer be relied upon' because of a 'material weakness' in internal accounting practices, following a similar announcement in May about its audited 2022 quarterly reports."
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