“Digital World isn’t just another dubious 2021 SPAC — it is a poster child for some of the worst abuses the investment vehicle has spawned,” wrote one short seller. mcelarier reports on why smart-money investors are shorting Donald Trump’s SPAC
Buyer beware. Photo-Illustration: Intelligencer; Photo: Mandel Ngan/AFP via Getty Images Over the past month, the stock price of the company that hopes to merge with Donald Trump’s new media outfit has surged by almost 25 percent, a move that seems counterintuitive given that the proposed deal is under investigation by both the Department of Justice and the Securities and Exchange Commission. By comparison, the S&P 500 rose only 9 percent in its July rally.
Trump Media has been beset by controversy, executive departures, and technical difficulties ever since its existence was unveiled last October, when it sought to cash in on a financial craze with a plan to raise something like $1 billion by merging with a publicly traded blank-check company known as a SPAC, or a special-purpose acquisition company. The merger of the two amounts to a sort of legal backdoor route to an IPO.
The combined weight of these probes makes it unlikely that Trump Media will ever get its public listing — and the cash that would go along with it. “The fact that the DOJ is looking at it is going to give the SEC more pause about allowing this deal to go forward,” says Robert Jackson, a former SEC commissioner who is now a professor at New York University School of Law.
The merger between Trump Media and Digital World was announced only six weeks after the SPAC’s IPO, and the hedge-fund investors that had bought into Digital Global when it went public quickly sold out in the trading frenzy that followed. “Digital World isn’t just another dubious 2021 SPAC — it is a poster child for some of the worst abuses the investment vehicle has spawned,” short seller Adrangi wrote in his report, detailing numerous red flags with the company and predicting the deal will never get the regulatory approval necessary for the merger to go through.
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