DD Support Board and Research Team

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December 8, 2021 06:34 PM ET (BZ Newswire) -- Politics
A former hedge fund manager is speaking out against the SPAC taking Donald Trump’s media company public.
What Happened: Whitney Tilson issued an update on Digital World Acquisition Corp (NASDAQ:DWAC), the SPAC that announced a merger with Trump Media & Technology.
“To be clear, my view that this is one of the stupidest things I’ve ever seen and that this stock is going to implode, likely within days, has nothing to do with my political views,” Tilson said in his Empire Financial email.
The bear case for the stock is based on fundamentals, of which Tilson says there are none and that TRUTH Social "is nothing more than an idea at this point.”
One of the biggest reasons Tilson remains bearish is a belief the SEC could block the merger, which would send the stock back down closer to its $10 net asset value.
“If the SEC acts, the reason it will cite is that there were discussions between DWAC’s CEO and representatives of Trump before DWAC’s initial public offering, which is forbidden,” Tilson wrote, citing a New York Times article.
Related Link: 7 Key Takeaways From The Donald Trump SPAC Deal
Tilson also said the SEC could block the deal because of the way the $1 billion PIPE was structured, giving large investors shares at a discount to the current market price. DWAC PIPE investors are able to resell their stock after the merger closes, instead of a typical SPAC lockout period, according to Tilson.
“This is an indirect way to do a big meme-stock offering to retail investors, with some hedge funds standing in the middle and getting a cut," he said.
Tilson calls the deal a scam and said retail investors could get hurt in the short and long term: “Mark my words, there’s no way the SEC allows this to go through.”
Why It’s Important: Tilson issued reports on DWAC on Oct. 4 and Oct. 22, warnings investors to stay away from the company.
One new detail from the DWAC SPAC that was released this week was the company confirming the SEC requested information on the merger deal, including the identities of some investors.
Tilson highlighting the potential risks that are now in front of the SEC on the deal could provide a cautionary tale of a deal not being official until the merger vote goes through.
The market has seen several SPAC deals called off in recent weeks, with some being due to timing and delays based on filings with the SEC.
Price Action: DWAC shares were up 28% to $65.42 on Wednesday. Shares have traded between $9.84 and $175 since going public in September.
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