When the fledgling social media company of former President Donald J. Trump and his merger partner announced in December that they had secured $1 billion in additional private funds for the deal, it sparked speculation about the investors’ identities.
Who were the three dozen or so investors who bet on the success of the former president’s new company? Were they big names on Wall Street? Political supporters of Mr. Trump? Sold technology and media funds with the promise of a right-wing alternative to Twitter?
A draft paper shared with DailyExpertNews about the $1 billion investment — dubbed a “private investment in public equity,” or PIPE — sheds some light. In such a deal, an investor exchanges cash for shares that are later registered by the company for sale on the open market.
According to the document, investors tend to be a mix of small to medium-sized hedge funds in the United States and Canada. The draft was circulated to investors on Tuesday, and two people briefed on the matter said a final version was expected to be submitted to regulators on Thursday, though the timing could change.
Hedge funds Pentwater Capital and Sabby Management are two of the larger investors in the private placement, as previously reported by The Times. Funds associated with Pentwater, a $10 billion hedge fund based in Naples, Florida, will receive the largest number of shares through the deal, according to the draft document.
Other major investors include Anson Funds Management, Kershner Trading Americas, K2 & Associates, Yorkville Advisors and MMCAP. While not household names, some in the hedge fund world are known for making PIPE investments, which often have lucrative terms. Many of Wall Street’s largest hedge funds missed the opportunity because they were concerned about the prospects of partnering with Mr. Trump.
At least two of the investors on the list were unknown.
A major investor is an entity called Truth SPC. The name appears to be a reference to Truth Social, the Twitter lookalike that is a flagship product of Mr. Trump’s company, Trump Media & Technology Group. But online searches, including US company data, did not reveal an entity by that name.
Another major investor whose beneficial ownership is unclear is called Red Rowan Investments. The company appears to have been founded in December in the Cayman Islands.
The $1 billion private placement is a key funding element for the proposed deal between Trump Media and Digital World Acquisition, a “blank check” or special-purpose acquisition company that went public in September. Digital World has raised nearly $300 million through its first public offering.
Investors in the private placement are not required to transfer funds until the Securities and Exchange Commission approves the merger. Once that happens, the investors will collectively get tens of millions of shares in the post-merger company, the draft document said.
The SEC is investigating whether any of the communications between Trump Media and Digital World before their deal was announced violated the rules.
Patrick Orlando, Digital World’s chief executive officer, did not return requests for comment, nor did representatives from Trump Media.
Truth Social got off to a slow start. Mr Trump only recently started posting regularly to his nearly three million followers. He had nearly 90 million followers on Twitter before the platform kicked him out last year.
Elon Musk, the billionaire entrepreneur who recently made an offer to buy Twitter, has said he will return Mr Trump to the platform if his deal closes. Mr Trump said he intended to stay on Truth Social. But a new licensing deal Mr Trump signed with Trump Media opens the door for him to also post political messages on Twitter if the social network lifts the ban.