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Buyer Be Careful In The SPAC/Trump Media Deal – Forbes

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Like many special purpose acquisition company (SPAC) deals, the proposed merger of Digital World Acquisition Corp. (DWAC) and the Trump Media and Technology Group is complex, which poses a risk to investors who do not understand SPACs. But this complexity is compounded by the fact that DWAC shares are trading as a meme stock with their own reddit forum, r/DWAC. It is possible, however, to dig into the details of the deal and make some conjectures about the future of the DWAC/Trump Media merger and what that might mean for its stock price movements.

The Deal

In September 2021, DWAC conducted its IPO by selling 30 million units (shares plus warrants) to 11 institutional investors, as well as the founder, at $10 per unit, raising around $300 million. The SPAC is currently trading over $70 per share, so the SPAC is worth more than $2 billion today. For the original IPO investors, the SPAC has been a great deal thus far, earning them at least a 500% return. However, whether it will be a great deal for the investors who bought in after the IPO is questionable. 

In October 2021, DWAC announced its merger deal with Trump Media, valuing Trump Media at a minimum of $875 million for a company that is still not operational. Depending on the merged entity’s stock price during the three-year period following the merger close, Trump Media shareholders will receive up to 127.5 million shares in the merged entity plus $1.2 billion in working capital. At the current share price, the market is valuing the merged entity at over $10 billion. 

In December 2021, DWAC raised an additional $1 billion via a private offering known as a private investment in public entity (PIPE). These PIPE investors have forward agreements to invest $1 billion in convertible preferred shares in the listed Trump Media as part of the merger closing. The number of common shares they can convert to is based on the value-weighted average price (VWAP) over the 10 days after the closing, known as the VWAP period. The lower the VWAP, the more shares allocated.

In its SEC filing for the PIPE offering, DWAC disclosed that it was under investigation by the U.S. Securities and Exchange Commission (SEC). It is illegal for a SPAC to have substantive merger discussions with possible targets prior to their listing and then it is fraud to state otherwise. It has been reported that DWAC and Trump Media discussed the deal prior to their IPO and allegedly lied about it in multiple SEC filings. The SEC investigation into this deal reportedly continues, the latest in a series of reported probes into the Shanghai-based Arc Capital, which was the sole advisor in the creation of DWAC.

Possible DWAC/Trump Media Price Movements

To form conjectures about future price movements, we need to distinguish among three groups of investors: the current investors, the PIPE investors, and the shareholders of Trump Media. The current investors with long positions would like the price to increase as much as possible. Speculators who have short positions, of course, want the price to fall. PIPE shareholders want it to fall during the VWAP period so they will be allocated more shares, and Trump Media shareholders want the price to rise after the merger so they can also be allocated more shares. 

Starting with the motivations of the PIPE investors, it is clear that they want the price during this VWAP period to decline to at least to $16.67 to get their maximum share allocation of 100 million shares. The PIPE investors can potentially dump 30 million or more shares on the market during the VWAP period to achieve their goal. Furthermore, the PIPE investors can also short at any price above $33.60 during the VWAP period. Therefore, it seems logical to expect the price to be pushed down during the VWAP period, as close as possible to $16.67.

Clearly, current buyers, including the meme players, expect the merger will get SEC approval and that the listed Trump Media will do well; they also may not understand the motivations of the PIPE investors. Meanwhile, for the current sellers there are two expectations: no SEC approval and an understanding of the PIPE investors. Thus, the current buyers and sellers are playing against each other, generating the current stock price. 

To illustrate, let’s assume that there is a 50% chance for SEC approval and a share price of $70.00. Some of those who are short selling expect SEC rejection, and therefore have a price expectation of $10.20, the approximate price at which DWAC shares can be redeemed. Those who expect the deal to go through have an implied price target of around $130 because 50% (130.00) plus 50% ($10.20) gives us the share price of $70.00. 

There are two factors that are affecting this expected price. First, the meme buyers are irrationally acting as if the probability of SEC rejection is small if not zero, which seems implausible given the evidence. Second, given the limited number of shares to short, there is excess demand from short sellers. According to Bloomberg, DWAC had the highest short borrowing costs of any stock in the fourth quarter, at 86%. These costs put a cap on how much the short sellers can push the price down. All these factors are causing DWAC’s current elevated share price, now above $70. 

Of course, the price of DWAC will jump if the SEC approves the deal, which would be a good time to sell or short and not the greatest time to buy given the expected actions of the PIPE investors. Informed traders know the motivations of the PIPE investors; therefore, given SEC approval, as the merger closure approaches, we can expect some of these traders to sell their shares if they have not already, and others will short sell, pushing DWAC’s price down. If desired, they could buy back during the VWAP period. In addition, immediately after the merger, during the VWAP period, we can expect an increase in share sales and short selling by the PIPE investors. 

Post-VWAP period we can expect the shorts to be covered and the stock price to be driven by meme investors, putting upward pressure on the price. However, post-merger, the number of shares available to trade will likely rise from my estimated 15 million shares today to include an additional 45 million shares from the PIPE investors and current institutional investors. Moreover, Trump Media shareholders and the founder will also be able to start selling their shares immediately after the closing if the merged entity’s stock price is above $12 for a sustained period, which would add a minimum of another 95 million shares to the market. What remains to be seen is whether there will be enough post-merger demand to soak up all these potential shares.

Which Way from Here

Investors must take into account two critical issues: the possibility that the SEC rejects the deal and the motivation of the PIPE investors, both of which would  likely put downward pressure on DWAC’s share price. Currently, short sellers are assuming that one or the other of these outcomes will cause the price to fall. The meme players appear to ignore these two possibilities, and hence their continued upward hopes for the stock price. Post-VWAP period, Trump shareholders and buyers of the stock will want to price to climb; but there could be almost ten times the number of shares trading at that time.

Unless investors currently own or are shorting DWAC stock, now is a risky time to buy and an expensive time to short. For those who currently own the stock, it may be wise to sell before the merger, and shares could be bought again post-VWAP period. If you are currently short, hold on to your short as long as possible given the cost of shorting. Whatever the strategy, it’s wise with any SPAC merger deal—and especially this one—for investors to know what they’re doing and why.

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Uvalde School Shooting Sparks Cries For Action Across Social Media – BNN

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(Bloomberg) — With former President Donald Trump scheduled to speak at the NRA’s National Meeting this Friday in Houston, in the same state where 19 children and two teachers were killed at the hands of an 18-year old gunman who stormed their school, rallying cries for gun control can be heard across social media.Former President Barack Obama posted a string of tweets that began,“It’s long past time for action, any kind of action. And it’s another tragedy—a quieter but no less tragic one—for families to wait another day.” He added, “Across the country, parents are putting their children to bed, reading stories, singing lullabies—and in the back of their minds, they’re worried about what might happen tomorrow after they drop their kids off at school, or take them to a grocery store or any other public space.” 

From LeBron James to Mia Farrow, an outpouring of grief from celebrities followed an emotionally charged speech by Golden State Warriors’ coach Steve Kerr who called a press conference before tonight’s NBA semifinals game to express outrage at the “50 senators” who have failed to move on a House bill on common-sense gun safety reforms that President Biden is ready to sign into law.Los Angeles Lakers’ LeBron James shared Kerr’s remarks and tweeted, “My thoughts and prayers goes out to the families of love ones loss & injured at Robb Elementary School in Uvalde, TX! Like when is enough enough man!!! These are kids and we keep putting them in harms way at school. Like seriously “AT SCHOOL” where it’s suppose to be the safest!” Oscar winner Matthew McConaughey, who was born in Uvalde and runs a foundation to help high school students in Texas, asked all Americans to take action “so that no parent has to experience what the parents in Uvalde and the others before them have endured.”

Other celebrities taking to Twitter to share their grief include human rights activist George Takei who co-starred in “Star Trek: The Original Series.” He tweeted, “14 children and 1 teacher. There are no words. And there are no actions ever taken.” National Youth Poet Laureate Amanda Gorman wrote, “It takes a monster to kill children. But to watch monsters kill children again and again and do nothing isn’t just insanity—it’s inhumanity.” Actress Mia Farrow retweeted Gorman and said, “Don’t anyone dare do “thoughts and prayers”. We are way past that. We need reasonable gun legislation like every other rational country.And late night talk show host James Corden commented on how shocked he is by America’s inability to act when it comes to gun control. “It doesn’t make sense to me. It doesn’t reflect the country that I think America is. The America I’ve always admired. You have a problem, you solve it. You’re on the forefront of medicine, of technology, of innovation. When there’s a world war, you are the ones we turn to. Yet on this issue America is one of the most backward places in the world.”Cordon noted this year there have been no school shootings in England, Japan, and Australia, but this year there have been 27 school shootings in America and 212 mass shootings and we are just five months into the year.

©2022 Bloomberg L.P.

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/REPEAT — Media Advisory – Minister Mendicino to make a funding announcement/ – Canada NewsWire

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OTTAWA, ON, May 24, 2022 /CNW/ – Members of the media are invited to join the Honourable Marco Mendicino, Minister of Public Safety, for a funding announcement under the Crime Prevention Action Fund to underscore the Government of Canada’s efforts to keep Canadian youth safe in Halifax and surrounding communities.

He will be joined by Lena Metlege Diab, Member of Parliament for Halifax West-Nova Scotia.

Following the announcement, Minister Mendicino and MP Diab will take questions from the media.

Date
Wednesday, May 25, 2022

Time
9:00 a.m. ADT

Location
YWCA Halifax
358 Herring Cove Road
Spryfield, Nova Scotia

Media representatives who wish to attend the event must arrive at least 15 minutes in advance to sign in and present photo ID and credentials.

Media can dial-in by using the numbers below. Media are encouraged to dial-in 15 minutes before the start of the press conference.

Participant dial-in numbers: 1-866-206-0153 / 613-954-9003
Access Code: 9504354#

Media and guests are asked to respect local physical distancing guidelines. Participants will be required to share their name and phone number for possible contact tracing. Wearing masks is recommended, especially when not able to maintain physical distance.

Public health protocols are in effect: please stay home if you are experiencing any of the symptoms listed here: Coronavirus (COVID-19) – Government of Nova Scotia, Canada, practice good hand washing and other hygiene steps, as well as physical distancing.

SOURCE Public Safety and Emergency Preparedness Canada

For further information: Audrey Champoux, Press Secretary, Office of the Minister of Public Safety, [email protected]; Media Relations, Public Safety Canada, 613-991-0657, [email protected]

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Analysis: Media coverage of Texas school massacre invokes Sandy Hook – CNN

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New York (CNN Business)A version of this article first appeared in the “Reliable Sources” newsletter. You can sign up for free right here.

“Mass shootings have become America’s copy and paste tragedy,” Politico’s Tyler Weyant wrote Tuesday evening. “We change the place, the town, the number of dead and injured. But the constant is lives lost, people who cannot be brought back, and the nation is left in a numb daze.”
At least, until, it happens again. In this case, it only took 10 days from the last slaughter for another spasm of senseless violence and terror to force the nation to go through the motions once again.
It’s all so predictable and formulaic at this point. First come the initial reports of a shooting, then details about fatalities and injuries, then details about the shooter and motive, and finally the tributes to the dead. All the while, there are widespread calls for the US to take some — any — action to stop these regular massacres from occurring while Fox personalities and GOP leaders insist the shooting shouldn’t be “politicized.”
“We perform this same skit every time,” pediatrician and Democratic congressional candidate Dr. Annie Andrews tweeted. “You say your thing. I say my thing. A few more people join the movement. It’s not working.”
I realize that, at this point, even pointing out the fact that we are stuck in this endless loop is cliche. But I can’t think of anything new or unique to say — and I honestly haven’t seen a single original point made in the past few hours. Years and years of these horrific acts have collectively drained us of any groundbreaking observations. Everything is just recycled. Recycled from the last shooting and the shooting before that.
“Make no mistake about it, nothing is done, and nothing is ever done,” Don Lemon said on CNN Tuesday night. “And we’re going to be back here. Grieving again, over another town.”
“This,” Lemon added, “is where we are right now.”

Stelter’s counterpoint

BRIAN STELTER WRITES:
I wish people would stop saying “there are no words.” There are so many words. Inhuman. Grotesque. Shameful.
I worry that rote news coverage and cliche reactions may unintentionally sanitize this sickening violence.
I wonder if words can slice through the cliches. Words like “destroy.” Heavy weaponry doesn’t just wound victims. These weapons destroy bodies. Local reporters on the scene say that family members are being asked to provide DNA samples to help identify the kids. “The agonized screams of family members are audible from the parking lot,” Niki Griswold of the Austin American-Statesman reported.
I want everyone to know that reality. I want answers to questions that are painful even to ask. What were the victims at Robb Elementary doing in the final peaceful minutes of their lives? What were they thinking when they heard loud noises down the hall? Did they recognize the sounds as gunshots? Did they fear for their lives? Did they cry out for their moms? For their dads? What did they feel in those final seconds?
There are plenty of words. We just have to use them.

“It’s almost like an instant replay of Sandy Hook”

“While watching the death toll rise” in Uvalde, “one father of a Sandy Hook victim felt defeated,” NYT reporter Elizabeth Williamson wrote Tuesday night. She spoke with Neil Heslin, whose son Jesse Lewis, 6, was killed in 2012, and who said he “felt compelled” to watch the news coverage. “It’s almost like an instant replay of Sandy Hook,” he told Williamson. “That replay, he predicted, would include a revived debate over gun legislation…”

Further reading

— Author James Fallows wrote a new blog post about “the empty rituals of a gun massacre,” drawing on his previous posts throughout the years.
— NBC’s Brandy Zadrozny: “I know I’m a reporter and so I’m not supposed to express opinions when babies are mass murdered … but what do we do? Who’s doing the work? How do we stop this?”
— Politico’s Sam Stein: “Sorry, but this tragedy isn’t ‘unimaginable.’ We saw ten people killed at a grocery store last week! We saw an elementary school shot up with 20 kids dead less than ten years ago. It’s very much imaginable now…”
— PBS’s Lisa Desjardins described texting with members of Congress, struggling “to hold back the feeling that I want to vomit, sob or wake up from this news. Their texts back showing similar feelings, reactions.”
A viral speech: Sen. Chris Murphy’s passionate address on the Senate floor “was viewed hundreds of thousands of times on social media,” per the NYT “What are we doing?” he asked his colleagues. “Why are you here if not to solve a problem as existential as this?”
— Novelist Min Jin Lee: “Our bodies are not designed to absorb and process this much violence, loss, and grief.”
— Liberal podcaster Jon Favreau: “I didn’t think it was possible to feel more sickened or enraged by school shootings, and then I became a parent. What an unimaginable nightmare.”
— Conservative commentator Alyssa Farah Griffin: “It’s a horrible, uniquely American epidemic. What’s the answer? Is there anything both sides can come together around? It’s not enough to just explain why each horrendous case is slightly different & therefore action isn’t justified.”

Local coverage from San Antonio

BRIAN STELTER WRITES:
The San Antonio Express-News, the daily newspaper closest to Uvalde, led with the fact that this is “one of the deadliest school shootings in modern U.S. history.” The story is full of local details: “It was also an award day at Robb Elementary,” since the end of the school year was coming up.
The paper also noted that this is “the second mass shooting in less than five years in the San Antonio area. In November 2017, a gunman armed with an assault-style rifle killed 26 parishioners at the First Baptist Church of Sutherland Springs, about 35 miles southeast of San Antonio…”

On board Air Force One

President Biden learned of the school shooting while flying back from Asia aboard Air Force One. Pool reporters on the plane were without WiFi and unaware of the news until press secretary Karine Jean-Pierre came back to the press cabin and said Biden would be speaking at the WH upon landing. Reporters turned on the in-flight TVs to see CNN’s live coverage. Per CNN’s MJ Lee, “a decision was made to make a ‘wire call’ — a rare phone call using the phone in the press cabin to alert the wires and news organizations of breaking news. While much of the news we were being told in the air had already been shared on the ground, reporters agreed — given the gravity of the news — upon a joint statement that would be read and disseminated to wires and news networks.”
All the major networks showed Biden’s prime time address live. He asked: “Where in God’s name is our backbone?”

Right-wing media immediately calls for more guns

The conversation in right-wing media immediately turned to calling for armed guards to protect schools. In other words, more guns. Pundits and personalities on Fox repeatedly suggested that funding allocated to schools to protect against Covid should be spent on security personnel. Meanwhile, personalities attacked those who called for gun control measures. After Biden did so in his address to the nation, Tucker Carlson attacked him in the most vicious terms. “The President of the United States, frail, confused, bitterly partisan, desecrating the memory of recently murdered children with tired talking points of the Democratic Party,” Carlson said, “dividing the country in a moment of deep pain…”

TV notes and quotes

— CNN will remain live all night and through the morning, with some anchors on the scene in Texas…
— Fox News preempted the 11pm comedy show “Gutfeld” for additional live coverage of the massacre…
— Savannah Guthrie will co-anchor Wednesday’s “Today” from Uvalde. Other NBC and MSNBC anchors en route to Texas include Lester Holt, Tom Llamas, José Díaz-Balart, and Ali Velshi…
— Tony Dokoupil will co-anchor “CBS Mornings” from Uvalde…
— The season finale of “FBI” was pulled by CBS “given that it involves the team preventing a school shooting,” Deadline reports
— Speaking of CBS, James Corden said on Tuesday’s “Late Late Show” that “this doesn’t reflect the country that I think America is. The America I’ve always admired…”

“It only gets worse”

WaPo reporter John Woodrow Cox, author of “Children Under Fire,” said he has been writing “almost exclusively about this subject — children who are shot to death or who survive and are forever broken — for more than five years.” He said “this feeling of horror, of helplessness, of nausea, of whatever the hell it is — it only gets worse after each day like this day.”
He pointed out on Twitter that “more than 300,000 students in K-12 schools have experienced gun violence on their campuses since Columbine.” That’s the sort of perspective that needs to be infused into the news coverage this week…

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