Trump Spac merger: drama over vote tally highlights tricky situation

Whether in politics or business, vote tallies connected to Donald Trump create drama. For nearly a year, the former US president’s business venture, Trump Media and Technology Group, has planned to go public via a blank cheque vehicle. The deal is currently stuck in the customary US regulatory review.

The special purpose acquisition company cannot afford to wait much longer. Its original legal documentation had required the deal to close by this month. The Spac has furiously tried to win a shareholder vote for a one-year extension but has so far come up short. Only a last minute $3mn cash injection from the Spac’s sponsor has provided a three month reprieve. Otherwise nearly $300mn in the pot would return to the Spac’s shareholders.

Those investors will expect $10.30 per share, the $10 par value of the Spac share plus interest earned. But share prices can act like opinion polls. Despite the likely liquidation price, shares of the Spac, known as Digital World Acquisition Corporation, still trade at more than $20 per share.

Shares of DWAC have soared as high as $97, buoyed by enthusiasm for Trump’s Truth Social app, a Twitter-like social media service. But mere loyalty to his cause does not bring in business. The Trump media group has struggled to gain traction during a year in which established rival brands such as Meta and Snap have suffered declines in advertising revenue. Valued at $875mn a year ago, this looks unrealistic for the Trump media group today, at least on traditional valuation metrics.

True, Trump’s following could pump up the Spac’s stock price beyond financial fundamentals. But not unless the Spac deal itself overcomes procedural hurdles. In its latest quarterly filing, the DWAC Spac declared less than $3,000 in cash. The FT reports that it has so far failed to pay the consultant that rounded up votes it needed to carry on. Devotion alone does not pay the bills.