Donald Trump and the backers of a blank-cheque company that plan to take his Truth Social media business public are scrambling to renegotiate a $1bn financing package with investors ahead of a crucial deadline for the deal.
Investors who committed to provide funds to the company through a so-called private investment in public equity (Pipe) transaction are in discussions with Patrick Orlando, the chief executive of Digital World Acquisition Corporation, to secure better terms, said two people familiar with the talks.
The revised agreement would shift more of the risk associated with the transaction to Trump and his backers, the people added.
The $1bn deal with investors was scheduled to expire on Tuesday. If they choose to withdraw their support, Truth Social owner Trump Media & Technology Group will receive much less cash even if its planned merger with DWAC, a so-called special purpose acquisition company (Spac), goes through.
Spacs are publicly traded companies that raise cash with the aim of acquiring private companies. Digital World initially had until September 8 to complete its planned deal with Trump Media, but was forced to seek a one-year extension from shareholders, blaming scrutiny of the transaction from federal prosecutors.
The Pipe investment, led by several hedge funds, is structured as preferred stock that is convertible into common shares of the to-be listed TMTG. The initial terms allowed investors to convert the preferred stock at $33.60 if the price of DWAC shares remained above $56, allowing them to recognise an immediate paper profit, according to securities filings.
The terms also said that if DWAC’s stock price fell below $56, the preferred stock conversion price would drop proportionately to as low as $10 per share — the price at which the Spac sold common stock in its initial public offering.
According to a person involved in the negotiations, one proposal could allow the conversion price to fall as low as $2 per share, ensuring that Pipe investors could still recognise a large immediate profit.
The lower conversion price would entail more shares being issued to Pipe investors, which would dilute other shareholders, including the former president. Talks are continuing and no decisions have been made on changes to the deal’s existing terms, the person said.
DWAC’s shares are trading above $20. Orlando and DWAC’s underwriter EF Hutton did not immediately return messages seeking comment.
Orlando has also been asking Pipe investors to agree to a 10-day extension, said the person involved in the talks, though they are sceptical that Trump would agree to the new terms. “Trump wants to make sure he doesn’t face a lot of dilution,” said one person involved. “Optically, he wants to avoid a $2 floor. It looks weak and he doesn’t want to look weak.”
Additional reporting by Sujeet Indap in New York