Digital World Acquisition Corp. (DWAC) Terminates Remaining PIPE
Digital World Acquisition Corp. (NASDAQ:DWAC) has disclosed the termination of the remaining $530.5 million of its PIPE, with investors currently exploring alternative financing options.
The decision comes as a result of challenges related to one of the closing conditions for the PIPE, specifically the effectiveness of the initial resale Registration Statement by the SEC.
As a result, the condition could not be met by the combination closing date. Despite attempts to secure a waiver from PIPE investors, none were willing to waive the condition. Consequently, on January 10, Digital World terminated the agreement in full, resulting in the cancellation of the remaining subscription amount of $530.5 million.
The SPAC originally had commitments totaling $1 billion, but this was later tweaked and reduced to around $533 million back in October. At that time, CEO Eric Swider saw this as beneficial, noting, “these cancellations are a positive development in our ability to consummate the Business Combination.”
During discussions to terminate the PIPE, certain investors, who previously subscribed for the remaining amount of the PIPE, began exploring alternative financing options. These options included the potential purchase of up to $50 million in convertible promissory notes, the convert option, or subscribing to receive warrants for each original $100 commitment, the warrant option.
Preliminary indications show that 42% of the remaining amount expressed interest in the convert option, while 58% showed interest in the warrant option.
The convert option involves potential convertible promissory notes bearing 8% interest, maturing twelve months after stockholders’ approval of the business combination. These notes would be convertible into a unit consisting of one share of Digital World Class A common stock and one-half warrant.
The company could redeem the notes after SEC registration under certain conditions, aiming to raise up to $50 million. Of those funds, DWAC would be expected to draw $10 million for its immediate use and a final draw of $40 million upon the closing of the combination.
However, negotiations are still ongoing and the final agreement on these options are subject to the execution of definitive documents and customary closing conditions.
Digital World announced its combination with Trump Media and Technology Group in October 2021. It currently has a completion deadline of March 8, but can extend until September 7. TMTG is an American social media and technology platform founded by former U.S. president Donald Trump.