Digital World Acquisition Corp. (DWAC) Adjourns Extension Vote for Fourth Time

Digital World (NASDAQ:DWAC) has once again adjourned its special meeting held this afternoon without finalizing its shareholder vote to amend its extension timeline to complete its combination with Trump Media (TMTG).

The meetings, which were held yesterday at 12:00pm, and again today at 12:00pm, and 3:00pm, and 5:00pm EST, were all adjourned to allow stockholders more time to vote. DWAC has now rescheduled the vote for October 10, marking the SPAC’s 4th postponement.

However, it’s important to note that regardless of the current extension vote, and if the vote fails, DWAC will still be able to extend its completion deadline by contributing $2.875 million in funds (or $0.10 per share) to trust each time for two 3-month extensions.  This extension vote’s intention was to amend that schedule so that DWAC instead could extend four times for 3-months each (as opposed to the current two times for 3-months each) and without needing to contribute funds to trust.

For emphasis and per a press release from earlier this week, “if the extension is not approved by the transaction deadline, then DWAC’s sponsor, ARC Global Investments II, LLC, intends to contribute $2,875,000 to the trust account, which is equal to $0.10 per share of Class A common stock issued in the IPO.”

And to further clarify, since there seems to be some confusion, DWAC is a 12 month IPO, which concludes as of September 8, 2022.  However, DWAC currently has the ability to extend twice for three months at a time with the first extension bringing its new completion deadline to December 8, 2022, but only if DWAC contributes $2.875M to trust, or $0.10 per share. If DWAC needs to extend further, by another 3-months, it can do the same by contributing the same amount to trust with a new deadline of March 8, 2023.

Since the SPAC’s share price has been trading above $10, a contribution to trust is unnecessary and the DWAC team was seeking to amend their documents to alter the extension mechanics by not only removing the contribution, but adding two more 3-month extensions so they would not need to put any additional extensions to a shareholder vote in March. If the vote had passed, DWAC would have been able to extend its deadline in 3-month increments (for a full year) without needing to both contribute funds to trust or holding a shareholder vote to extend.

Generally speaking, since DWAC was trading well above the current redemption value and closing today at $23.35, a contribution to trust to extend would have been a superfluous expense.  Hence, the DWAC team’s want to change that.

However, what’s interesting now is that the PIPE termination date is September 20th, roughly 3 weeks ahead of the new extension vote on October 10th.  After September 20th, PIPE investors are no longer committed to funding the PIPE. They may still wish to, but they are no longer contractually obligated and can walk away.  Furthermore, as we’ve seen with other PIPEs, and in particular Concord’s PIPE comes to mind, once PIPE investors are past their outside date, all sides are free to renegotiate.

So this brings in to question why DWAC chose to set their new vote date after the PIPE termination date of September 20th. The chess players in this deal have a number of different moves and that includes both black and white pieces. Both sides might feel they have terms they’d like to discuss. Particularly given the recent subpoena’s and lawsuits, but also a potential Presidential bid?  Somebody get Kasparov on the horn because we’re unsure of what the next move is.

Nontheless, as a reminder, the SPAC needs 65% of its shareholders to vote in favor of the extension which is a challenge in itself. Many of the retail trading platforms are still not well-equipped to accommodate corporate action-type scenarios such as proxy votes. As a result, securing that 65% of shareholders to vote and vote yes will not be an easy achievement.

Digital World brings about $294 million into the deal from its current trust and supplemented this with a $1 billion PIPE. The SPAC originally announced its $875 million deal with Trump Media last year on October 21. TMTG is working to launch a Trump-centric social media platform in the first quarter of 2022, to be followed by a subscription video on demand service.