Hedge funds record unprecedented gains on Trump’s SPAC deal

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Former US President Donald Trump reacts after his speech during a rally at the Iowa States Exhibition Center in Des Moines, Iowa, United States on October 9, 2021. REUTERS / Rachel Mummey / File Photo

October 21 (Reuters) – Hedge funds that have invested in the blank check acquiring company that struck an $ 875 million deal to merge with former US President Donald Trump’s new social media company are expected to make five times their investment, according to regulatory documents.

It was the biggest gain ever recorded by investors in Special Purpose Acquisition Companies (SPAC) on the first day after a deal was announced, according to SPAC Research.

Nearly a dozen hedge funds invested in SPAC, Digital World Acquisition Corp (DWAC.O), when it went public (IPO) in September, according to the documents. Like other PSPCs, Digital World did not disclose which company it was looking to buy.

Hedge funds have injected hundreds of billions of dollars into these types of vehicles over the past two years.

Investor enthusiasm has waned in recent months as some companies that merged with PSPCs failed to deliver on their bullish forecasts and retail investors suffered losses. The reaction of the stock market has been so weak to recent transactions that some hedge funds are only making pennies on the dollar by buying in the IPOs of PSPCs, then selling their shares on the stock exchange or buying them back for their price. ‘Initial Public Offering.

But hedge funds that invested in Digital World’s IPO are set to quintuple their investment after Digital World shares jumped more than 400% after the deal was announced with new Trump Media and Technology group. . They were hovering around $ 50 late Thursday afternoon, giving Digital World a market value of $ 1.7 billion.

The hedge funds included DE Shaw, which oversees $ 60 billion in assets, and Yakira Capital Management, which invests some $ 472 million, according to a regulatory filing.

Meteora Capital Partners, a subsidiary of large investor SPAC Glazer Capital LLC, Sander Gerber’s Hudson Bay Capital, Boothbay Fund Management, Boaz Weinstein’s Saba Capital, Shaolin Capital Management, K2 Principal Fund and Radcliffe Capital Corp, another large investor SPAC, also invested money, documents show.

Company representatives did not respond to requests for comment or declined to comment.

The Digital World share rally is also a boon to Trump, as most stock investors who buy the shares at a price well above their IPO price of $ 10 will not seek to buy them back at that price. guaranteeing that Trump Media and Technology Group will receive the most if not all of the $ 293 million to which it is entitled under the merger.

Some hedge fund founders have donated to the Democratic Party, including President Joe Biden, who defeated Trump in the 2020 US election. Others have backed Republican candidates, including Trump.

Gerber of Hudson’s Bay donated to Trump in last year’s election and backed the two Republican Senate candidates in Georgia. Weinstein donated to Biden and supported Democratic candidates in Georgia, among other donations.

David Shaw, who founded DE Shaw, donated millions of dollars to the Liberal Political Action Committee Priorities USA Action, according to records. Representatives for the companies did not respond to a request for comment or declined to comment.

Most hedge funds invest regardless of party affiliation

Reporting by Svea Herbst-Bayliss in Boston Additional reporting by Anirban Sen in New York Editing by Greg Roumeliotis and Will Dunham

Our standards: Thomson Reuters Trust Principles.


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