Here’s an almost-impossible-to-believe story: People who put their faith in Donald Trump’s keen business instincts (and their money into one of his ventures) may soon lose their shirts! Metaphorically, of course. No one is literally losing their shirt. That’s just a sly euphemism for losing your house, car, family, dignity, and one or more of your expendable organs thanks to a known grifter who’d shove his own child off an aerial gondola for a charcuterie board full of Kraft lunch meats.
The Washington Post reports that savvy investors who put their trust in Trump’s surpassing business acumen may soon be left with, well, next to nothing.
It all starts with Digital World Acquisition. That’s the SPAC—which stands for “special purpose acquisition company”—that has long intended to merge with Trump Media & Technology Group, which is the company behind Trump’s social media platform Truth Social.
According to The Post, Digital World could go tweets up within the week. Or "truths" up. Or whatever Trump is calling his barmy lies these days.
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Wait, wait, wait. What the hell is an SPAC? Just knowing what the letters stand for doesn’t really help.
Harvard Business Review:
SPACs are publicly traded corporations formed with the sole purpose of effecting a merger with a privately held business to enable it to go public. Compared with traditional IPOs, SPACs often offer targets higher valuations, greater speed to capital, lower fees, and fewer regulatory demands.
Despite the investor euphoria, however, not all SPACs will find high-performing targets, and some will fail. Many investors will lose money.
HBR also notes that SPACS have “a two-year life span.” That’s important here. Super-duper important.
The Washington Post offers a bit more.
SPACs are known as “blank check” companies because they raise money from investors to buy a private company before identifying who they intend to target. Once the SPAC decides on and discloses its target, it works to merge with that company and bring it to the public stock market, avoiding some of the demands of a more traditional initial public offering, or IPO.
If the SPAC is unable to complete the merger within the time it specifies, it must return the money it raised to shareholders.
So the original plan, announced in July 2021, was pretty straightforward: Digital World would merge with Trump Media & Technology. Then the companies would pool their resources, and shareholders would be proud owners of “a tech titan worth $875 million at the start and, depending on the stock’s performance, up to $1.7 billion later.”
The companies even had a (somewhat) specific date in mind for the merger—12-18 months, not the perpetual two-weeks-from-now drop date that Trump usually promises for his most ambitious projects. But somewhere along the line those plans got Trumped, and shareholders are learning a harsh lesson about doing business with serial fuckups.
And the lesson could get far harsher in the coming days, as The Post’s Drew Harwell explains.
Now, almost two years later, the deal faces what could be a catastrophic threat. With the merger stalled for months, Digital World is fast approaching a Sept. 8 deadline for the merger to close and has scheduled a shareholder meeting for Tuesday in hopes of getting enough votes to extend the deadline another year.
If the shareholders decline, BOOM! Digital World has to shut the whole thing down and give ‘em all of their money back—a stunning $300 million—and Trump’s company? It doesn’t get a dime.
For Digital World, it would signal the ultimate financial fall from grace for a special purpose acquisition company, or SPAC, that turned its proximity to the former president into what was once one of the stock market’s hottest trades. Its share price, which peaked in its first hours at $175, has since fallen to about $14.
Oh, my. That share price is not … good. Maybe Digital World could merge with Friendster instead. Or Pets.com. In related news, schadenfreude futures are through the roof. Buy now or miss out bigly.
As The Post notes, this could be the final chapter for a company that’s been continually marred by apparent rule-breaking and other seemingly sketchy business practices. Shortly after Trump Media announced its planned merger with Digital World Acquisition, questions arose over the way the plans were handled.
The New York Times, Oct. 29, 2021:
To get his deal done, Mr. Trump ventured into an unregulated and sometimes shadowy corner of Wall Street, working with an unlikely cast of characters: the former “Apprentice” contestants, a small Chinese investment firm and a little-known Miami banker named Patrick Orlando.
Mr. Orlando had been discussing a deal with Mr. Trump since at least March, according to people familiar with the talks and a confidential investor presentation reviewed by The New York Times. That was well before his SPAC, Digital World Acquisition, made its debut on the Nasdaq stock exchange last month. In doing so, Mr. Orlando’s SPAC may have skirted securities laws and stock exchange rules, lawyers said.
Orlando, shockingly, got the boot from his Digital World CEO gig this past March. He was allowed to stay on the board, which had its own problems—in June a former board member and two investor buddies were arrested on charges of conspiracy and insider trading.
Remember how Harwell explained that SPACs raise money before figuring out what company they’re going to target? Not Digital World! In July, the company and the SEC reached an $18 million settlement. Remember those “people familiar” cited by The Times just above? Well, we’re all familiar now! As the SEC reports, rather than following the rules, “an individual who would later become DWAC’s CEO and Board Chairman, and others involved with DWAC, had extensive SPAC merger discussions with TMTG.” That individual is Orlando, obvi.
It’s pretty much what you’d expect from a Trump-affiliated entity. The only thing missing is a whistleblower complaint about its executives flying six separate private jets to the Caymans to sup on sautéed panda sweetbreads and parboiled baby seals.
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I’m no math wizard, but by my calculations if you invested in Trump’s SPAC at the top of the market, when the shares were trading at $175, and sold today, at $14, you’d now have … less. Less money. A lot less.
If the merger deadline fails to get extended another year, these investors will be even worse off than they are as of this writing. The Post reports that Digital World would be forced to “cease all operations except for the purpose of winding up” and reimburse investors at a paltry $10.24 per share. So on Sept. 8, these investors won’t actually be voting to just get their money back. They’re voting to just walk away, instead of pretending another year will make things better.
And at the risk of giving you schadenfreude poisoning, you may be interested in the woeful tale of at least one member of Trump’s financially fucked flock.
CNBC, Oct. 27, 2021:
Rep. Marjorie Taylor Greene has invested up to $50,000 in the SPAC stock linked to former President Donald Trump’s planned social media platform.
According to a public disclosure, the Georgia Republican purchased a stake in Digital World Acquisition Corp., or DWAC, on Friday. The stake is worth at least $15,000 but no more than $50,000.
While she was loading up on shares of Trump Unicorn Steaks, she was unloading these perennial losers:
Her other transactions include sales on Jan. 20, the day President Joe Biden was inaugurated.
According to her disclosure report, that day Greene sold Facebook shares worth at least $15,000, Apple shares worth at least $15,000, Amazon shares worth at least $15,000 and shares in Alphabet, which owns Google, also worth at least $15,000.
Meanwhile, the fact that so many of the SPAC’s investors are clueless Trumpkins bodes poorly for its prospects of securing an extension. The Post spoke with University of Florida finance professor Jay Ritter, who said he suspects that many of the SPAC’s investors who bought shares did so out of love and loyalty to Trump and are unlikely to even be aware of the upcoming vote—which increases the chance that the bid will fail and Digital World will be forced to fold.
And it surely can’t help that Trump himself is helping to prop up Truth Social’s chief competitor, X, the platform formerly known as Twitter. Trump recently sat down for an interview with Tucker Carlson on X, and in his first tweet in more than two years he posted his own mug shot on the platform after being arrested in Georgia.
Then again, Trump may simply want to avoid betting all his chips on a sure loser. While Trump Media projected Goof Social would have 41 million users by the end of 2023, The Post notes that it currently has about 500,000 monthly active users. Which, according to my back-of-the-envelope calculations is … less. Less than 41 million.
Meanwhile, Trump is not giving up without a pretend fight. On Monday, he posted this on the platform: “I BELIEVE THAT TRUTH SOCIAL IS THE GREATEST & ‘HOTTEST’ FORM, SYSTEM, & PLATFORM OF COMMUNICATION IN AMERICA, & INDEED THE WORLD, TODAY. THAT’S WHY I USE IT — THERE IS NOTHING THAT COMES EVEN CLOSE!!!”
Hopefully, when Trump releases his health care and infrastructure plans in another two weeks, he uses a lot fewer capital letters. People might not take him seriously otherwise.
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Check out Aldous J. Pennyfarthing’s four-volume Trump-trashing compendium, including the finale, Goodbye, Asshat: 101 Farewell Letters to Donald Trump, at this link. Or, if you prefer a test drive, you can download the epilogue to Goodbye, Asshat for the low, low price of FREE.
Correction: A previous version of this story’s headline incorrectly implied that a liquidation of Digital World would “bankrupt” its shareholders.