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Matt Levine

The Trump SPAC Pitch Is Weird

Also investment banking fees, stock indexes and AMC NFTs.

Yesterday we discussed the $1 billion private investment that Trump Media & Technology Group is planning to raise from investors when it merges with Digital World Acquisition Corp., a special purpose acquisition company that is taking TMTG public. The basic point was that, in this $1 billion PIPE (private investment in public equity) investment, TMTG will sell stock to hedge funds for $1 billion, at a 40% discount to the trading price of the stock. The hedge funds will then immediately turn around and sell that stock to public retail investors, very much not at a discount. So the hedge funds will get an instant 67% return (buy at $24, sell at $40, etc.) at the closing of the merger, as a reward for committing money to Trump now. If the stock is below $16.67 at closing they will not get that return, and if it’s below $10 they’ll lose money. The stock closed at $43.81 yesterday and is up today, so it’s a decent bet that it will be above $10 when the deal closes, but it’s a weird company and a lot could go wrong.

Anyway there’s a lot more in yesterday’s post but I wanted to add a few miscellaneous points here.