(Bloomberg) - The SPAC taking Donald Trump’s media venture public is running into a roadblock: Its own investors.
Digital World Acquisition Corp. said on Thursday it will again delay a shareholder vote, this time to Nov. 22, for a no-cost deadline extension, the sixth postponement in the past two months. It’s the latest example that Trump’s loyal following of retail traders, regardless of their diamond hands, don’t understand the importance of voting.
The flailing push to give the SPAC until next September to complete the merger could save financier Patrick Orlando and Digital World’s sponsors millions of dollars and alleviate the headache of hounding investors that have shown they don’t respond to emails, texts, and calls begging them to vote. The group can continue to court votes until Dec. 8 when they will need to choose between paying up another $2.9 million for a three-month extension or throw in the towel.
For investors, voting to extend the deadline is a no-brainer. The stock trades roughly $6.15 higher than the $10.20 in cash they’d receive if the merger falls apart. That means the hoards of retail traders holding on to the stock either don’t understand how to vote or aren’t paying attention, industry watchers like Jay Ritter, a finance professor at the University of Florida, say.
Trump Media’s goal of competing with the likes of Facebook hinges on the success of Truth Social, a Twitter clone that’s underwhelmed since its debut. It was added to Google’s App Store last month as long as it adheres to requirements that it moderates content and removes objectionable posts.
Digital World’s 60% premium stands out in a sea of blank checks that are trading for less than the money they raised. The loyalty of individual investors comes despite various probes from the US government, a SPAC market that’s been plagued by huge stock crashes, and a choppy investing environment that’s delivered blows to every social media peer.
SPACs are known as blank checks because they raise money in IPOs with the goal of taking an unidentified company public. They give themselves a window to buy something or return the cash to investors. Management teams can get short extensions to find and close deals, but they usually have to get shareholder approval and pay them to do it.
The goldrush of SPACs spawned more than 800 new blank check companies in a two-year period when celebrities and politicians from Shaquille O’Neal to Alex Rodriguez were listed as members of management teams. However, the bubble has burst with 509 still on the hunt for deals and 44 have already shut down to return cash to investors and eating millions in losses.
By Bailey Lipschultz
