$1B Headed Back to Investors in Trump's Struggling Truth Social Deal

The publicly listed shell company that raised $1 billion to merge with former President Trump's media company won't end up with any of it. Investors have canceled $467 million in funding, Digital World Acquisition Corp. said in a Thursday regulatory filing. DWAC CEO Eric Swider said in a statement that the remaining $533 million would be returned to investors, thereby ending the private investment in public equity (PIPE) transaction. Trump Media & Technology Group, owner of Truth Social, is painting this as a good thing. In a press release, CEO Devin Nunes said it's "in the best interest of TMTG's equity holders and completing our merger with DWAC as soon as possible," per CBS News.

But it's unclear how the move will benefit TMTG. Indeed, "the loss of funding for DWAC appears to be a step backward for the prospective merger," per CBS. Without the PIPE, TMTG is set to receive just $293 million in cash raised by the special-purpose acquisition company in its initial public offering in September 2021, rather than the much greater amount, per Reuters. Investors were able to backtrack on their commitments as the merger deadline has been pushed back repeatedly amid an investigation from US financial regulators. In July, DWAC agreed to pay $18 million to the Securities and Exchange Commission to settle claims that it violated antifraud provisions related to its IPO, per the Financial Times.

In an August amendment to the merger deal, DWAC requested the unwinding of the PIPE. In another change, Trump was handed new shares in DWAC "with more voting power," per Reuters. He controlled 90% of TMTG as of February 2021. "Despite how others may seek to characterize the PIPE commitment cancellations, we want our shareholders to understand that these cancellations are a positive development in our ability to consummate the business combination," reads Swider's statement, per CBS. He added TMTG has a "reduced need for capital" and a "commitment to growing a sustainable business model." DWAC or TMTG can move to terminate the merger next month if their boards find it won't benefit shareholders, per Reuters. (More Truth Social stories.)