Whitney Tilson Thinks SEC Can Block Trump Media's Merger with SAC Digital World Acquisition Corp (DWAC), Sending Stock 80% Lower

December 8, 2021 1:39 PM EST

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Former hedge fund manager and current newsletter write Whitney Tilson told subscribers of his Empire Financial newsletter that he expects the SEC to block the merger of Trump Media and SPAC Digital World Acquisition Corp (NASDAQ: DWAC), which he said could send the stock to $10, or more than 80% percent lower.

From the newsletter:

"I am now even more convinced that the stock should be avoided at all costs, as I think the U.S. Securities and Exchange Commission ("SEC") is likely to block the merger, at which point DWAC will quickly trade back down to its cash balance of $10 per share.

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 ("IPO"), which is forbidden. The details were exposed in this article in yesterday's New York Times: Trump's Media Company Is Investigated Over Financing Deal...

But the real reason, I suspect, if the SEC blocks the deal, is that it dislikes the recently announced $1 billion private investment in public equity ("PIPE"), which allows the investors in the PIPE (mostly hedge funds, I assume) to rip the faces off of retail investors by buying the stock for a 40% discount to the market price and immediately dumping it in the market for a quick 67% gain. Bloomberg's Matt Levine covered the details in his column on Monday: The Trump SPAC Did a PIPE."

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