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DWAC, the Trump Social-Media SPAC, Could Make Its Backers $440 Million


Former President Donald Trump’s social-media venture would benefit from his online following but face competition.


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The obscure financiers who launched the shell company that is taking former President

Donald Trump’s

social-media venture public are poised for a big payday if the deal gets completed.

The total windfall would stand at about $440 million at the stock’s current price, after shares skyrocketed more than sixfold following the deal’s announcement. The pay framework isn’t Trump-specific—it comes from the distinctive structure of special-purpose acquisition companies, or SPACs, such as

Digital World Acquisition Corp.

DWAC 9.85%

The creators of Digital World—better known by its stock ticker, DWAC—include Chief Executive Officer

Patrick Orlando,

a former derivatives trader at

Deutsche Bank AG

who has been involved with several SPACs. One of his other SPACs was based in Wuhan, China, and recently called off a roughly $7 billion deal with a Chinese energy company. DWAC’s Chief Financial Officer is

Luis Orleans-Braganza,

a member of Brazil’s National Congress.

No other executives are listed in Digital World’s registration statement with the Securities and Exchange Commission. Five members of the SPAC’s board of directors are listed. It isn’t clear how the incentives would be shared among Messrs. Orlando, Orleans-Braganza, the board and any other advisers. SPACs, also known as “blank-check companies,” often don’t have to disclose full details of how incentives are shared under SEC rules.

A spokesman for the SPAC declined to comment.

The deal with Trump Media & Technology Group resulted from a meeting between Messrs. Trump and Orlando within weeks of the former president leaving office this year, The Wall Street Journal has reported.

Former President Donald Trump at a rally in Iowa this month.


Dan Brouillette/Bloomberg News

Here is how an investment that cost the SPAC team about $10 million has ballooned to be worth roughly $450 million, according to New York University School of Law Prof.

Michael Ohlrogge,

who studies SPACs: Shell companies like Digital World raise money from investors and begin trading in the stock market with the sole intent of merging with a private company such as Trump Media & Technology Group. In return for finding a company to take public and launching the SPAC, the creators are allowed to buy 20% of the shares at ultracheap prices.

When the SPAC merges with the private company, the private firm replaces the blank-check company in the stock market. The creators’ deeply discounted stake is then transferred into a sizable position in the newly public company, allowing them to typically make several times their initial investment of several million dollars. Their paper profit from the “sponsor promote” typically comes out to tens of millions.

But because shares of Digital World have soared after the deal was announced, the SPAC creators would stand to make much more money than usual. Even if the shares were to fall sharply, they would together stand to make tens of millions. The SPAC team isn’t allowed to sell any of the sponsor promote until several months after the deal is completed, according to the firm’s registration statement. If it follows a typical SPAC timeline, the deal would likely close some time next year.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

The $440 million estimate excludes parts of the promote that were given to early-investing hedge funds when the blank-check company was created in September. It doesn’t include other investments that might be part of the deal.

The potential payout shows the divergence between SPAC executives and individual SPAC investors, who often buy shares at lofty prices and stand to lose money if the stock reverses.

Shares of Digital World ended Wednesday’s session at $64.89, up from less than $10 on Oct. 20, before the deal was announced. They traded as high as $175 Friday.

Digital World warrants—which are part of the promote and allow the holder to buy more shares at specific prices in the future—have risen to $32.25 from roughly 50 cents before the deal was announced.


Would you invest in the Trump social-media SPAC? Why or why not? Join the conversation below.

The deal to take Trump Media & Technology Group public values Mr. Trump’s new company at about $875 million, including debt, but the SPAC’s stock price now implies a valuation of several billion dollars. Little is known about the new company other than it plans to launch a new social-media network called Truth Social in the coming months to combat large technology firms. It could use the SPAC’s roughly $290 million to fund its growth.

In the coming months, Trump Media & Technology Group will have to disclose its ownership structure and financial performance in regulatory filings before its SPAC deal can be completed.

Mr. Trump’s firm would benefit from his large online following but would compete with the likes of Facebook Inc. and Twitter Inc., as well as other social-media platforms targeting conservatives, such as Parler and Gab. The former president was banned from Facebook, Twitter and other mainstream platforms following the January assault on the U.S. Capitol by some of his supporters.

Write to Amrith Ramkumar at [email protected]

Copyright ©2021 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the October 28, 2021, print edition as ‘Backers Of Trump SPAC Eye Windfall.’

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