Warrants tied to Donald Trump’s SPAC soar 2,686% amid merger hype

Donald Trump waves to the cameraFormer President Donald Trump Getty

  • Warrants tied to Digital World Acquisition, a SPAC that plans to merge with Donald Trump’s Truth Social, soared as much as 2,686% on Thursday.
  • The warrants surged from Wednesday’s close of $0.52 per share to as high as $14.49.
  • SPAC warrants are more volatile than the underlying stock and grant its holders the right to purchase shares of the company at a pre-determined price.

Donald Trump’s plan to merge his Truth Social media company with Digital World Acquisition sent shares of the SPAC soaring more than 400% on Thursday.

But that gain translated into even bigger gains for public warrants tied to the SPAC, which soared as much as 2,686% in Thursday trades.

The Digital World Acquisition Warrants jumped from Wednesday’s close of $0.52 to as high as $14.49 on hype surrounding the proposed merger with Trump’s up and coming social media competitor.

According to Digital World’s S-1 filed with the SEC, the warrants have a strike price of $11.50, meaning they were well in the money as the underlying Digital World stock hit a high of $52 per share. In other words, holders of the warrants could exercise them to purchase shares of the SPAC at $11.50 even though its currently trading well above that level.

          <p>Volume in Digital World's warrants soared to 73 million shares on Thursday, far outpacing the few thousand shares that would trade prior to the deal announcement.<!-- sh_cad_7 -->

Public warrants tied to SPACs are inherently more volatile than the underlying stock because they can expire worthless and are not redeemable if a deal is not completed within what is often a two-year deadline.

The agreement with Digital World puts an $875 million enterprise value on Trump Media & Technology Group. A potential earnout of $825 million in additional shares could bring the cumulative valuation to $1.7 billion, depending upon the performance of the stock after the merger is completed, Trump Media said in a press release.

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