Bull Session: Will the extension vote of DWAC and Trump Media be successful?

A special purpose acquisition, or SPAC, is a shell company that raises money from investors and lists publicly with the sole intention of merging with a private company to take it public.

Shareholders are voting this week on an extension of up to a year, allowing the companies additional time to address government investigations into the deal and make other necessary disclosures. The SPAC needs 65% of shareholders to support the extension.

The SPAC merger was announced nearly a year ago. Investigations by the Securities and Exchange Commission and federal prosecutors have hindered the deal, which could raise up to roughly $1.3 billion in cash for the former president's firm. Trump Media & Technology Group operates the social-media platform Truth Social, an alternative to Twitter.

Not surprisingly, Digital World has had to navigate itself through a number of unknowns. If the company meets the 65% support rate from its shareholders, it will provide more time for the company management to proceed further with the merger deal with Trump Media & Technology, which operates the Truth Social App.

The uncertainty about the voting is unusual because a failure to approve the extension will almost certainly cost investors money. If the deal falls through, shareholders would likely get roughly $10.2 a share, about half of the current share price.

The failure of shareholders to approve the full-year extension would make the merger's completion less likely, some analysts said. Six months might not be enough time to complete the merger because the SPAC and social-media firm would have to undergo an extended process of regulatory filings and SEC responses.

Source: WSJ, Bloomberg