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Digital World Acquisition Corp.

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Digital World Acquisition Corp.
Company typePublic
(2021–2024)
IndustrySpecial-purpose acquisition company (SPAC)
Founded11 December 2020; 3 years ago (2020-12-11)
DefunctMarch 2024 (March 2024)
FateMerged with Trump Media & Technology Group
Websitedwacspac.com

Digital World Acquisition Corp. (DWAC), founded in 2021, was an American special-purpose acquisition company (SPAC), a shell corporation listed on a stock exchange with the purpose of acquiring (or merging with) a private company, thus making the private company public without going through the initial public offering process, which often carries significant procedural and regulatory burdens.[1][2] The company was led by CEO and Chairman Patrick Orlando, the founder and CEO of investment consulting and investment banking firm Benessere Capital.[3] In October 2021, the company announced a proposed merger agreement with Trump Media & Technology Group (TMTG), the owner of Truth Social, which completed in March 2024.[4][5]

Operations

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Main article: Trump Media & Technology Group

On September 3, 2021, DWAC commenced trading on the Nasdaq, after selling 25 million shares in its IPO.[3]

On October 20, 2021, DWAC and Trump Media & Technology Group (TMTG) announced that they had entered into a definitive merger agreement that would combine the two entities, allowing TMTG to become a publicly traded company. DWAC was created with the help of ARC Capital, a Shanghai-based firm specializing in listing Chinese companies on American stock markets that has been a target of U.S. Securities and Exchange Commission (SEC) investigations for misrepresenting shell corporations.[6][7][8] Some investors were surprised to learn that their investment money was being used to finance a Trump company.[9] In 2021, the DWAC Trump venture was linked with another company, China Yunhong Holdings, based in Wuhan, Hubei,[10][11] until its lead banker who was running the merger promised to sever ties with China in December 2021, stating that Yunhong was to "dissolve and liquidate".[12][13] In February 2022, Reuters reported that the connection between Shanghai-based ARC Capital and Digital World was more extensive than thought, with ARC having offered money to get the SPAC off the ground.[13]

In August 2022, DWAC secured shareholder approval for four three-month extensions to close the deal, deferring shareholder meetings until September 8, 2023. The firm needed to close the deal by that date, or have 65% of shareholders approve another extension, or face liquidation.[14] Shareholders approved a one-year extension on September 5.[15]

In March 2023, Digital World Acquisition fired its CEO Patrick Orlando.[16]

DWAC disclosed in an October 2023 regulatory filing that after investors had canceled $467 million of their commitments, the firm would return the remaining $533 million of the $1 billion it had raised.[17][18][19]

On March 22, 2024, DWAC shareholders approved a deal to merge with TMTG. Following the vote, the share price closed the day at $36.94 following an open value of $43.92 and a high of $46.70, just prior to the vote.[20] [5]

Investigation of illegal trading

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On June 29, 2023, three people were arrested on charges that they had illegally traded DWAC based on nonpublic knowledge before the proposed merger was announced in 2021.[21]

The founder of the DWAC SPAC, Miami banker Patrick Orlando, had been discussing the deal with Trump since at least March 2021, as The New York Times reported days after the TMTG deal was announced. This may have skirted securities laws and stock exchange rules, since SPACs are not allowed to have a target company in mind prior to going public. The formation of the SPAC was announced in May 2021 and it was taken public that September. By mid-2021, people affiliated with TMTG were telling Wall Street investors that the company was nearing a deal to merge with a SPAC. Trump and Orlando had initially discussed a deal through another of Orlando's SPACs that was already publicly traded, but it was deemed too small for the Trump deal. Deal discussions could have been proper when the first SPAC was being considered but improper after the SPAC was formed. DWAC stated in three prospectuses that it had not had "any substantive discussions, directly or indirectly, with any business combination target."[22]

Orlando's stake in DWAC increased by $420 million from the original $3 million he invested.[23]

In late 2021, the SEC and the Financial Industry Regulatory Authority asked DWAC for information about stock trading and communications with TMTG prior to their deal being announced. (DWAC disclosed this request in a December 2021 regulatory filing.)[24][25] The company disclosed in June 2022 that the SEC was expanding its inquiry, and days later said a grand jury seated by the U.S. Attorney for the Southern District of New York (SDNY) had subpoenaed DWAC and each member of its board, as well as documents.[26][27]

On July 3, 2023, DWAC announced its intent to settle by paying an $18 million fine to the SEC and revising some of its filings.[28] On July 20, the SEC announced the settlement.[29]

Notable stockholders

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In October 2021 it was reported, based on information provided by congresstrading.com, that House representative Marjorie Taylor Greene (R-GA) had purchased between $15,000 and $50,000 DWAC shares after the Trump merger was announced.[30][31][32]

References

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  1. ^ Domonoske, Camila (2020-12-29). "The Spectacular Rise Of SPACs: The Backwards IPO That's Taking Over Wall Street". NPR. Archived from the original on 2021-02-22. So what is a SPAC? A "special purpose acquisition company" is a way for a company to go public without all the paperwork of a traditional IPO, or initial public offering. In an IPO, a company announces it wants to go public, then discloses a lot of details about its business operations. After that, investors put money into the company in exchange for shares. A SPAC flips that process around. Investors pool their money together first, with no idea what company they're investing in. The SPAC goes public as a shell company. The required disclosures are easier than those for a regular IPO, because a pile of money doesn't have any business operations to describe. Then, generally, the SPAC goes out and looks for a real company that wants to go public, and they merge together. The company gets the stock ticker and the pile of money much more quickly than through a normal IPO.
  2. ^ Broughton, Kristin; Maurer, Mark (September 22, 2020). "Why Finance Executives Choose SPACs: A Guide to the IPO Rival". The Wall Street Journal. Retrieved 22 February 2021.
  3. ^ a b "Tech-focused SPAC Digital World Acquisition prices downsized 25M stock offering at $10/Sh | Seeking Alpha". 3 September 2021.
  4. ^ La Monica, Paul R.; Clark, Adam (March 26, 2024). "Truth Social Owner's Stock Soars as Trump Media Starts Trading Under DJT Ticker". Barron's. Archived from the original on March 26, 2024.
  5. ^ a b "Trump's Social Media Company Will Go Public After Merger With Shell Company Is Approved". HuffPost. 2024-03-22. Retrieved 2024-03-22.
  6. ^ "Trump announces launch of media company, social media site". AP News. 2021-10-21. Archived from the original on 21 October 2021. Retrieved 2021-10-31.
  7. ^ Goldstein, Matthew; Hirsch, Lauren; Enrich, David (29 October 2021). "Trump's $300 Million SPAC Deal May Have Skirted Securities Laws". The New York Times. Retrieved 31 October 2021.
  8. ^ Douglas MacMillan; Jonathan O'Connell (December 23, 2021). "Trump's newest business partner: A Chinese firm with a history of SEC investigations". The Washington Post.
  9. ^ Enrich, David; Goldstein, Matthew; Goldmacher, Shane (21 October 2021). "Trump Takes Advantage of Wall Street Fad to Bankroll New Venture". The New York Times.
  10. ^ Feng, John (2021-10-22). "How Donald Trump's Truth Social is connected to China". Newsweek. Retrieved 2022-08-03.
  11. ^ "Trump's new social media backer tied to China lifestyle venture". www.aljazeera.com. Al Jazeera. Retrieved 2022-08-03.
  12. ^ Feng, John (2021-12-08). "Patrick Orlando, bankroller of Donald Trump's Truth Social, Severs China Connections". Newsweek. Retrieved 2022-08-14.
  13. ^ a b Wang, Echo; Berens, Michael (2022-02-10). "How a Trump deal got a boost from a China-based financier". Reuters. Retrieved 2022-08-14. The initial investors in the management entity, or sponsor, of Digital World put in a total of $11.8 million, disclosures show. / The Washington Post and Bloomberg News previously reported that ARC has a stake in the sponsor of Digital World. The fact that ARC offered money to get the SPAC off the ground is reported here for the first time.
  14. ^ Harwell, Drew (September 2, 2023). "Trump's Truth Social facing a key funding deadline". The Washington Post.
  15. ^ Harwell, Drew (September 5, 2023). "Truth Social investment partner extends deadline, avoiding liquidation". The Washington Post.
  16. ^ Picciotto, Rebecca (22 March 2023). "Trump-linked Digital World Acquisition Corp fires CEO Patrick Orlando". CNBC. Retrieved 2023-04-05.
  17. ^ Picchi, Aimee (October 13, 2023). "Trump Media's funding partner says it's returning $1 billion to investors, with many asking for money back". CBS News.
  18. ^ Harwell, Drew (September 2, 2023). "Trump's Truth Social facing a key funding deadline". The Washington Post.
  19. ^ Coster, Helen (12 October 2023). "SPAC to return remaining $533 million raised for Trump social media deal". Reuters.com. Reuters. Retrieved 13 October 2023.
  20. ^ "Search - MarketWatch".
  21. ^ Scannell, Kara; Egan, Matt (2023-06-29). "Prosecutors charge three investors with insider trading in Trump SPAC deal". CNN Business. Retrieved 2023-06-29.
  22. ^ Goldstein, Matthew; Hirsch, Lauren; Enrich, David (October 29, 2021). "Trump's $300 Million SPAC Deal May Have Skirted Securities Laws". The New York Times.
  23. ^ Sen, Anirban; DiNapoli, Jessica (2021-10-22). "Trump deal delivers $420 mln windfall for dealmaker". Reuters. Retrieved 2023-02-07.
  24. ^ Mangan, Dan (6 December 2021). "Trump SPAC under investigation by federal regulators, including SEC". CNBC.
  25. ^ Egan, Matt (December 6, 2021). "Federal regulators are investigating the Trump SPAC deal". CNN.
  26. ^ Morris, Chris (June 14, 2022). "SEC expands investigation into Donald Trump's Truth Social". Fortune.
  27. ^ Primack, Dan (June 27, 2022). "Subpoenas issued to directors of SPAC taking Trump's social network public". Axios.
  28. ^ Kilander, Gustaf (2023-07-04). "Truth Social SPAC reaches SEC settlement as Trump indictment comments reemerge – live". The Independent. Retrieved 2023-07-04.
  29. ^ Delouya, Samantha (2023-07-21). "SPAC seeking to merge with Trump's Truth Social media company settles with the SEC". CNN Business. Retrieved 2023-07-21.
  30. ^ Franck, Thomas; Li, Yun (2021-10-27). "Rep. Marjorie Taylor Greene bought shares of Trump SPAC Digital World Acquisition as stock skyrocketed". CNBC. Retrieved 3 December 2021.
  31. ^ Egan, Matt (27 October 2021). "Marjorie Taylor Greene invested as much as $50,000 in the Trump SPAC before its stock plunged". CNN. Retrieved 3 December 2021.
  32. ^ Pietsch, Bryan. "Marjorie Taylor Greene buys up to $50,000 worth of Trump SPAC stock during week of wild fluctuation". The Washington Post. Retrieved 3 December 2021.
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