DWAC, the Trump Social-Media SPAC, Under SEC Probe: What to Know– 2nd UpdateBY Dow Jones & Company, Inc.— 1:13 PM ET 12/06/2021
What is DWAC?
Digital World Acquisition Corp. ( DWAC) is a special-purpose acquisition company, or SPAC. It is essentially a pot of money raised from investors with the intention of finding a private company to buy. In this case, DWAC completed its initial public offering in September when it started trading under the ticker DWAC. In late October, Trump Media & Technology Group, former President Donald Trump's new digital-media venture, said it would combine with DWAC.
Hundreds of SPACs have been launched in the past two years, tapping into two market trends: investor enthusiasm to buy anything, and a flood of private startups looking to hit the public markets.
What is being investigated?
The Securities and Exchange Commission reached out in November, seeking information from Digital World about its trading policies, investors and communications between the SPAC and Mr. Trump's company, according to a regulatory filing.
After the deal was announced, The Wall Street Journal and other media outlets reported that Mr. Trump met with Digital World Chief Executive Patrick Orlando early this year and before the SPAC had raised money. If the meeting is deemed to have represented substantive deal talks, it could violate SEC rules. That is because SPACs aren't supposed to have a target company identified at the time they initially raise money, analysts say.
It couldn't be determined whether the SEC is specifically seeking information regarding Mr. Orlando's meeting with Mr. Trump.
Why have DWAC shares been going crazy?
The SPAC's shares have been trading in the mid-$40s, an increase of more than 300% since the merger announcement. They peaked at $175 during intraday trading in late October.
The stock has surged sporadically in recent weeks in part because it is linked to Mr. Trump, one of the major figures on social media, and this seems to have spurred a wave of individual-investor interest. Day traders on platforms such as Reddit have posted photos of their quick fortunes, inspiring others to jump on board, some analysts said. The firm is also promoting itself as having a large market opportunity in presenting an alternative to what it views as the liberal-minded media establishment.
How is Donald Trump involved?
Unclear. He is listed as chairman (a notoriously vague corporate title) of Trump Media & Technology Group, which is merging with DWAC and has plans to launch a conservative-leaning social network called Truth Social.
Who is Patrick Francis Orlando?
While plenty of well-known corporate and political insiders have launched SPACs, such as former Goldman Sachs Group Inc. President Gary Cohn and former Honeywell International Inc. Chief Executive Dave Cote, Patrick Orlando isn't among them. According to securities filings he is the chief executive of Benessere Capital, a Miami investment firm he founded in 2012. His first SPAC, Yunhong International, went public earlier this year and signed a deal to acquire energy transportation solutions company Giga Energy, but that deal was called off in September.
Another one of Mr. Orlando's SPACs said in late November it is taking a hydrogen-fuel production-technology company, eCombustible Energy LLC, public.
How much cash will Trump Media & Technology raise?
The SPAC deal is expected to generate more than $1 billion in cash proceeds for Mr. Trump's new company to grow.
The Digital World SPAC has $287.5 million, though SPAC investors could withdraw some of that money before the deal closes. In early December, Trump Media & Technology also said it had raised $1 billion in a private investment in public equity, or PIPE, as part of the deal. That is among the largest PIPEs to date.
The PIPE and Digital World stock price imply a valuation of several billion dollars for Mr. Trump's company.
What is Truth Social?
The Twitter-like platform users can post "truths" and "re-truths" is one leg of a planned media empire that would compete with the likes of Netflix and CNN, according to a company presentation this week. The presentation doesn't make it clear when the planned platform would go live.
If the merger is approved, Trump Media & Technology Group would succeed Digital World in the stock market and begin trading under that name.Market Cap today: 1.63Billion
https://eresearch.fidelity.com/eresearch/evaluate/news/basicNewsStory.jhtml?symbols=DWAC&storyid=202112061313DOWJONESREALTIME005819