Traders Redeem Shares of Trump-Linked SPAC for Significant Loss Before Vote

Traders Redeem Shares of Trump-Linked SPAC for Significant Loss Before Vote

(Bloomberg) — Some investors in the blank-check company that took Donald Trump’s fledgling media company public voluntarily took a 75% loss by pulling out of the deal.

Most read on Bloomberg

Nearly 5,000 shares of Digital World Acquisition Corp. were bought back for $10.87 each ahead of a vote to approve the special purpose acquisition company’s deal to take Trump Media & Technology Group public, according to a filing Friday. DWAC, as the SPAC is called, has not traded below buyout value since the Trump Media tie-up was announced in October 2021.

The stock closed at $42.90 on Wednesday, the redemption deadline, meaning one or more investors exchanged shares worth about $212,000 for about $54,000. The money comes from the more than $275 million the parent company of Trump’s Truth Social platform is expected to receive from the SPAC.

“Either they had no idea what they were doing — and maybe thought they could buy back at the current market price,” or they did it out of spite for the former president, Matthew Tuttle said, Managing Director of Tuttle Capital Management.

Regardless, buying back shares at a price much lower than they trade at on the open market is “as smart as lighting the fire of money,” he said.

SPAC deals typically offer shareholders the opportunity to trade shares for around $10 – the price at which many SPACs go public – plus interest and additional sweeteners. The ability to buy back rather than participate in the merger has been a way for SPACs to protect investors from bad deals. Redemption rates have averaged above 90% since the SPAC boom over the past two years.

Representatives for DWAC did not respond to a request for comment.

For DWAC, this isn’t the first time investors have bought back shares for a fraction of the price they could have sold them for on Nasdaq.

Some 29,000 shares were repurchased in September when investors extended the DWAC deadline, according to an earlier filing. In the two years since DWAC went public, about 40,000 shares have been repurchased, according to calculations by SPAC Research.

The SPAC merger closed Monday, and the combined company is expected to begin trading on Nasdaq under the symbol DJT on Tuesday. DWAC, up 185% this year, is trading at around $50 on Monday.

Most read from Bloomberg Businessweek

©2024 Bloomberg LP

Source Reference

Latest stories