The SPAC raised $293,250,000 million between an IPO and private placements in September 2021, and at one time had PIPE commitments exceeding $1 billion. The PIPE has since been eliminated from the deal. That decision followed the SEC's notification to Digital World that a registration statement for a secondary offering cannot be filed if the securities to be offered under the registration statement have not yet been sold and that in ay event the resale registration statement that the SPAC filed on May 27, 2022 had not been reviewed by the SEC. As a result, the PIPE's closing condition could not be satisfied as written on or before the closing of the Trump deal, unless the SPAC and the PIPE investors agreed to waive the condition. None of the remaining PIPE investors were willing to do so, according to the filing.
Absent any other funding, cancellation of the PIPE would leave Digital World with its approximately $308 million cash in trust, less about $39 million in anticipated expenses connected to the Trump Media deal. That would supply Trump's company with about $269 million at closing — a significant reduction from the $1.2 billion at deal announcement more than two years ago
Digital World said it continues negotiating for the issuance of convertible notes for up to $50 million. If that financing is secured, the company would be expected to draw $10 million for immediate use and a final draw of $40 million upon closing the business combination with Trump Media.
There's a $60 million minimum liquidity condition on the deal with the former president's media company. Ther SPAC said it would be unable to satisfy that condition if redemptions reach 63% or more. If holders of more than 18.2 million public shares redeem their stock, the business combination is not expected to close, according to the proxy.
TMTG has broad discretion in the use of the net proceeds post-closing and may not use them effectively, the SPAC also cautions in the proxy.
The transaction accounting adjustments included in the unaudited pro forma combined balance sheet as of Sept. 30:
- Reflects the reclassification of $307.2 million of cash and cash equivalents held in the Trust Account at the balance sheet date that becomes available to fund expenses in connection with the Business Combination or future cash needs of the Company.
- Reflects the payment of $10.1 million of deferred underwriters' fees. The fees were paid at the Closing out of the trust account.
- Represents estimated post September 30, 2023 transaction costs totaling $14.5 million, which include legal, accounting, advisory and consulting fees
- Reflects the reclassification of approximately $306.2 million of Class A shares subject to possible Redemption to permanent equity.
- Reflects the conversion of TMTG Convertible Promissory Notes to shares of stock. The shares automatically convert upon the Closing.
- Represents the issuance of 87.5 million shares of the post-combination company's common stock to TMTG equity holders as consideration for the reverse recapitalization.
- Reflects the conversion of Digital World Class B shares held by the initial shareholders to Class A shares.
- Reflects the reclassification of Digital World's historical accumulated deficit.
- Reflects the maximum Redemption of 18.2 million shares for $193.3 million Digital World is required to fulfill the Financial Closing Conditions. The ability to meet the Financial Closing Conditions will not be known until the level of redemptions of Public Shares in connection with the Business Combination is known. As a result, if redemptions exceed $193.3 million (or 63% of the Trust Account assets before redemptions) the Business Combination would not close. As such, the Maximum Redemption scenario does not reflect the full amount of Public Shares that may be redeemed under Digital World's Charter. Accordingly, if holders of more than 18.2 million Public Shares seek to exercise such Redemption Rights, the Business Combination is not expected to close.
- Reflects the settlement of Digital World liabilities, including $18 million for the SEC settlement. As of September 30, 2023 $18 million of the $18 million SEC settlement was recorded as a liability.
- Reflects the issuance of convertible notes up to the maximum capacity