Hedge funds that invested in the blank-check acquisition company that made a $875 million deal to merge with former U.S. President Donald Trump’s new social media venture are set to make five times their investment, regulatory filings show.
It is the biggest gain investors in so-called special purpose acquisition companies (SPACs) have ever recorded on the first day after a deal was announced, according to SPAC Research.
Nearly a dozen hedge funds invested in the SPAC, Digital World Acquisition Corp, in its initial public offering (IPO) in September, according to the filings. Like other SPACs, Digital World did not disclose which company it was seeking to buy.
Hedge funds have pumped hundreds of billions of dollars into these types of vehicles in the past two years.
The investor excitement had fizzled in the past few months as some companies that merged with SPACs failed to deliver on their bullish projections and retail investors nursed losses. Stock market reaction has been so poor to recent deals that some hedge funds only make pennies on the dollar by buying into the IPOs of SPACs and then selling their shares in the stock market or redeeming them for their IPO price.
But the hedge funds that invested in Digital World’s IPO are set to quintuple their investment after Digital World’s shares jumped more than 400% after the deal with newly launched Trump Media and Technology Group was announced. They were hovering around $50 in late afternoon trading on Thursday, giving Digital World a market value of $1.7 billion.
