Shares of Digital World Acquisition Corporation, the cash-rich shell company that plans to merge with former President Donald J. Trump’s social media company, rose as much as 70 percent on Monday, a day after Florida Gov. Ron DeSantis dropped out of the presidential election. The race to capture the Republican presidential nomination and bring Mr. Trump closer to securing it.
The jump reflected investor enthusiasm for Trump Media and Technology Group, the beleaguered company that has been trying since 2021 to merge with Digital World, a special purpose acquisition company. Digital World raised nearly $300 million in its initial public offering in September 2021, money Trump’s company needs to run its business.
Digital World shares have already more than doubled since Mr. Trump won the Iowa primary on January 15. At roughly $44 per share, SPAC shares are trading at their highest per share price since the spring of 2022.
“Now that Trump appears to be the de facto Republican nominee, it’s only natural that this momentum will continue,” said Christy Marvin, a former investment banker and founder of SPACInsider, which collects data on the SPAC market. “In a way, it’s a measure of how he performs in the race.”
The rise in shares of Digital World, which is largely owned by about 400,000 retail investors, comes as it approaches the completion of its long-awaited merger with Trump Media, the parent company of Truth Social. The online platform has become Mr. Trump’s personal megaphone for criticizing his critics, political rivals and the state and federal prosecutors pursuing criminal and civil cases against him.
Truth Social, which has about seven million users, earned about $3.3 million in mostly advertising revenue during the first nine months of 2022, according to a regulatory filing. During the same period, Trump Media incurred losses of about $49 million. The company had little cash on hand at the end of September, and had used up most of the $37 million in private financing it had raised since 2021, according to the filing.
Trump Media’s accountants said the social media company would not be able to continue as a “going concern” without the influx of cash. That makes completing the deal with Digital World crucial for Mr. Trump, who will be the largest single shareholder in the post-merger company.
A Trump Media spokeswoman did not respond to a request for comment.
The pending merger between Digital World and Trump Media, announced in October 2021, has been delayed due to an SEC investigation into early deal talks between the two companies that preceded the SPAC IPO.
Last summer, Digital World agreed to pay an $18 million fine to the Securities and Exchange Commission and review some corporate filings after securities regulators said early deal talks with Trump Media had violated merger laws governing SPACs. An investigation by federal prosecutors that led to insider trading charges being filed against three investors linked to Digital World also put the deal on hold.
With those investigations concluded, Digital World and Trump Media said in December that the two companies hoped to complete the merger by the end of March. But the SPAC is still waiting for the SEC to complete its review of the merger agreement — known as an S4 — with Trump Media. Digital World on Monday submitted its third review of the merger agreement, which included a copy of the proxy ballot shareholders would be asked to cast to approve the deal.
Digital World said last week that it is talking to some investors about raising an additional $50 million in funding for the post-merger company. The company has been in talks with these investors — mostly hedge funds — about selling interest-bearing promissory notes that convert into company stock, but nothing has come to fruition yet.