![]() For example, if the VWAP is $35, then the conversion price will be $21. If the VWAP is between $56 to $16.67, the PIPE investors will receive a 40% discount to the VWAP on their conversion. The PIPE investors’ conversion price will most likely be at a discount to the listed share price, determined by the value-weighted average price (VWAP) over the 10 consecutive trading days after the close of the merger (the VWAP period). Therefore, the PIPE investors will do everything in their power to push the share price down so they can maximize the number of shares they are allocated. The problem is, this convertible preferred PIPE is constructed as a death spiral, the lower the Trump Media share price, the more common shares the PIPE investors get. The convertible preferred shares are convertible to common A shares, where the number of shares they convert into is a function of the share price of the listed Trump Media. The PIPE investors have forward agreements to purchase convertible preferred shares in the listed Trump Media for $1,000 apiece upon the merger’s close. ![]() To help finance the merger, DWAC raised $1 billion in a private investment in public equity (PIPE) offering. Assuming that the DWAC/Trump Media merger deal is allowed to go forward (read my previous article, “ DWAC: SEC Approval Unlikely For Trump Media Merger Deal ” concerning that) and closes, the trading landscape for the then-listed Trump Media stock will immediately change. The financial aspects of the company make no difference for these index funds.As Digital World Acquisition Corp ( NASDAQ: DWAC) and the Trump Media and Technology Group pursue a SPAC merger and thereby a stock market listing for Trump Media, the next steps for DWAC are an S-4 filing with the Securities and Exchange Commission (SEC), then hopefully SEC approval and a shareholder vote. ![]() Index Fund managers have to buy these shares simply because Mullen is listed in the index. That fund literally has THOUSANDS of companies, and the stake in Mullen is an automated reflection of the percentage of market cap that Mullen holds relative to the other companies in that fund. The key thing to realize is that there is no actual thought or consideration to the purchase. The Vanguard Total Stock Market Index Fund that holds 36M shares (largest institutional holding) is just as the title states, a Total Stock Market Index, meaning that Vanguard literally buys stock in all the companies that fit their rule for that Total Stock Market fund. Russell index funds make up most of the other institutional funds that hold Mullen. You can see that they are all index funds, which simply track specific segments of the entire stock market. For example, here are some of the Vanguard funds holding Mullen. The reason for the holdings from large institutions like Vanguard and Blackrock is because they are simply index fund holdings. It keeps taking more and more shares of dilution to receive an equivalent amount of financing as before. This is why people call Mullen's financing mechanism a "death spiral". And it looks like the next 2.5B more shares will be distributed at about the same rate as well, if not lower. Because all equity sales has been through these preferred shareholders, over the course of 15 months Mullen has only made an average of 15 cents per share ($257M in funding received as of end of December, at the cost of 1.7 Billion shares dilution). ![]() The critical question that no one at Mullen has ever answered is why the company has continued to dilute its equity through these loan sharks all this time. In other words, just these two guys will literally double the number of shares outstanding. So while the company has gone through more than 1.7 Billion shares of dilution, it is these "preferred shareholders" that have been reaping the benefits.Īnd this will only continue to happen, with the Prospectus filed today showing that just Esousa and Acuitas together will be able to sell nearly 1.8 BILLION shares. They have profited massively from receiving hundreds of millions of shares from the company at far below market value and then selling them at the market, which usually nets them something like 250% or more immediate gain each time. But there's really nothing surprising about this, since selling shares has been their modus operandi the entire time that Mullen has been publicly traded. I'm seeing some chatter about the 13G filings for Acuitas and Esousa showing that they owned zero shares as of the end of December. ![]()
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