NEW YORK: Former US President Donald Trump’s new venture signed second-largest private placement ever with convertible shares in merger with blank check acquisition company, according to SPAC Research, thanks to its terms exceptionally favorable and although it has yet to launch its social media app.
None of the 36 investors who took part in the US $ 1 billion social media fundraiser this month-venture-raise-about-1-billion-funds-2021-12-04, many of whom are hedges funds and family offices, did not reveal their identities. Many of them were concerned about publicly associating with Trump, who was banned from Facebook and Twitter for encouraging protests leading up to the Jan.6 attack on the United States Capitol, sources said. to Reuters.
The structure of what is known as private investment in public capital (PIPE) was atypically favorable to these investors, even though they could end up paying more than three times what the investors in the company‘s initial public offering. acquisition of blank checks in September paid off, according to industry experts.
This is because they will be allowed to sell their shares right after the finalization of the merger of former President Trump Media & Technology Group (TMTG) and the blank check acquisition company, Digital World Acquisition Corp, rather than a few. months later while is customary.
They will be entitled to buy the shares at a 40% discount from where the shares traded, on average, within 10 days of closing, with a cap of $ 33.60 per share and a floor of $ 10 per share, depending on the terms of the agreement.
These investors can sell the shares immediately after the deal is completed for a profit. This sale would put downward pressure on the share price. If the stock drops enough, they could get more stock based on the deal formula, which they can resell, in a trade Wall Street calls a “death spiral” for stocks in the United States. company.
The merger, however, has proven popular with day traders and Trump supporters who invest in so-called ‘meme actions. “It is possible that enough of them are buying the shares to offset the impact of PIPE investors dumping their shares.
Another benefit offered to PIPE investors that is not seen in other transactions of this type is the right to sell the stock short. It also allows them to lock in their profits as they can borrow stocks, sell them instantly, and then receive the stocks they are entitled to with a discount after the merger closes so they can close their positions. – Reuters