Hedge fund sells holding in SPAC backing Trump as shares soar

Dive Brief:

Saba Capital, a $3.5 billion hedge fund, on Thursday sold its unrestricted shares in Digital World Acquisition, a company backing an online media venture created by former President Donald Trump, as the shares soared toward a two-day gain totaling 970% at the close of trading on Friday.
Digital World, a $293 million special purpose acquisition company (SPAC), and Trump Media & Technology Group on Wednesday announced a merger and the launch of a social network led by Trump.
Saba sold its holdings in Digital World during the early hours of trading on Thursday. “I knew that for Saba the right thing was to sell our entire stake of unrestricted shares, which we have now done,” Boaz Weinstein, founder and chief investment officer of Saba, said in an e-mailed statement reported earlier by the New York Times. “Many investors are grappling with hard questions about how to incorporate their values into their work. For us, this was not a close call.”

Dive Insight:

Trump was banned from Facebook, Twitter and YouTube after Jan. 6 rioting at the U.S. Capitol by insurrectionists opposed to the results of the November presidential election. The social media networks said Trump spread falsehoods about voting fraud.

The Trump venture will open a new social media channel for the former president. “Trump Media & Technology Group’s mission is to create a rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley,” according to the announcement by Trump and Digital World.

A SPAC offers private companies a quicker, cheaper alternative to traditional initial public offerings. Also known as a “blank-check” company, a SPAC raises money by selling shares, which it lists on a stock exchange. It then seeks to merge with a private company, usually within a two-year timeframe.

Securities and Exchange Commission (SEC) Chair Gary Gensler said in May that the agency will seek to strengthen investor protections by investigating how SPACs raise cash from the public and merge with target companies.

The SEC’s corporate finance, examinations and enforcement divisions will “be closely looking at each stage to ensure investors are being protected,” Gensler said in testimony to a House subcommittee, adding “each new issuer that enters the public markets presents a potential risk for fraud or other violations.”

Digital World and Trump Media valued their merger at $875 million. The company plans to launch a social network called Truth Social by the first quarter of 2022. It also intends to create a subscription streaming service including entertainment, news and podcasts led by Scott St. John, executive producer of “Deal or No Deal” and “America’s Got Talent.”