Donald Trump-linked SPAC Digital World Acquisition Corp. DWAC announced late Wednesday that the SEC has approved the registration statement regarding its proposed merger with Trump Media & Technology Group, owner of the Truth Social platform. The amended S-4 statement filed with the regulator indicates that the former president could receive a windfall at a time when he faces financial challenges due to legal issues.
Fine Print: As per the merger agreement, Digital World will be renamed New Digital World, with each share valued at $10. Trump will hold at least 58.1% of the voting power and outstanding shares of New Digital World, making it a “controlled” company.
Reports suggest Trump could receive over 78 million shares, valued at approximately $3.94 billion based on DWAC’s closing price on Thursday, which ended at $50.56, up 16.10%, according to Benzinga Pro data.
Additional investors in the SPAC stand to benefit from an earnout tied to stock performance. The merger agreement offers TMTG shareholders the opportunity to receive up to 40 million additional New Digital World common shares if the stock meets performance milestones in the first three years following the merger.
However, the New Digital World shares issued are subject to a six-month lock-up period, delaying Trump’s access to them as a potential income source in the near term.
Why It Matters: The completion of this long-awaited merger could provide a welcome financial boost for Trump as he eyes a potential second term.
The deal faced regulatory scrutiny after the SEC investigated potential breaches of SPAC merger laws, resulting in Digital World agreeing to pay an $18 million penalty and revise its corporate filings to comply with federal securities laws.
Digital World stated in an 8-K filing on Thursday that it would announce the date for a special shareholder meeting to vote on the proposed merger within two business days.
Despite legal challenges, including several criminal and civil cases, Trump remains a front-runner for the Republican nomination and leads President Joe Biden in hypothetical matchups.
However, hefty legal bills, including $89 million in damages from two cases brought by author E. Jean Carroll, may pose significant financial burdens for the former president.