Digital World Shares Surge as Republican Primary Field Narrows

Shares of Digital World Acquisition Corp., the cash-rich shell company that plans to merge with former President Donald Trump’s social media company, soared as much as 70 percent on Monday, a day after Florida Gov. Ron DeSantis dropped out of the race for the Republican presidential nomination and brought Mr. Trump even closer to securing it.

The jump reflected investors’ enthusiasm around Trump Media & Technology Group, the beleaguered company that has been trying since 2021 to merge with Digital World, a special purpose acquisition company. Digital World raised roughly $300 million in its September 2021 initial public offering — money that the Trump company needs to run its business.

Digital World’s shares had already more than doubled since Mr. Trump won the Iowa caucuses on Jan. 15. At roughly $44 a share, the SPAC is trading at its highest stock price since spring 2022.

“Now that Trump appears to be the de facto Republican candidate, that momentum is naturally going to carry over,” said Kristi Marvin, a former investment banker and founder of SPACInsider, which collects data on the SPAC market. “In a way, it’s a barometer for how he’s doing in the race.”

The surge in shares of Digital World, which is largely held by some 400,000 retail investors, comes as it inches closer to completing its long-delayed merger with Trump Media, the parent company of Truth Social. The online platform has become Mr. Trump’s personal megaphone for blasting his critics, political opponents and state and federal prosecutors pursuing criminal and civil cases against him.

Truth Social, which has about seven million users, took in about $3.3 million in mostly advertising revenue during the first nine months of 2022, according to a regulatory filing. Over that same period, Trump Media incurred about $49 million in losses. The company had little cash on hand by the end of September, and it has exhausted most of the $37 million in private financing it has raised since 2021, according to the filing.

Trump Media’s accountants have said the social media company will not be able to continue as a “going concern” without an influx of cash. That makes the closing of the deal with Digital World essential for Mr. Trump, who will be the largest single shareholder of the post-merger company.

A Trump Media spokeswoman did not return a request for comment.

The pending merger between Digital World and Trump Media, announced in October 2021, had been delayed by a Securities and Exchange Commission investigation surrounding early deal talks between the companies that preceded the SPAC’s initial public offering.

Last summer Digital World agreed to pay an $18 million penalty to the S.E.C. and revise some of its corporate filings after securities regulators said those early deal talks with Trump Media had flouted merger laws governing SPACs. An investigation by federal prosecutors that led to the filing of insider trading charges against three investors associated with Digital World also had held up the deal.

With those investigations out of the way, Digital World and Trump Media said in December that the companies hoped to complete the merger by the end of March. But the SPAC is still waiting for the S.E.C. to complete its review of the merger agreement — known as an S4 — with Trump Media. On Monday, Digital World filed its third revision of the merger agreement, which included a version of the proxy ballot shareholders will be asked to cast to approve the deal.

Digital World said last week it was talking to some investors about raising an additional $50 million to finance the post-merger company. The company has held talks with those investors — mainly hedge funds — about selling them interest bearing promissory notes that convert into company stock, but nothing has come of it yet.