Hedge funds earn millions as Trump Spac media shares surge – .

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Hedge funds earn millions as Trump Spac media shares surge – .


A group of 11 hedge funds, including DE Shaw and Saba Capital, generated millions of dollars in potential earnings in a single day after a specialist acquisition firm that merged with Donald Trump’s new social media group rose 421% on Thursday.

The former US president this week launched a social media outlet called Truth Social that aims to compete with Facebook and Twitter, creating a platform for his right-wing supporters ahead of a possible bid for power in 2024.

Spac shares went from $ 9.96 to $ 51.90. They ultimately closed at $ 45.50, up 357% from the previous day.

In September, hedge funds bought the initial public offering of a Spac called Digital World Acquisition Corporation, promoted by Patrick Orlando, sponsor of three other Spacs that previously traded derivatives at BT Capital Markets and Deutsche Bank.

Hedge fund investors owned almost all of Digital World’s $ 293 million IPO, which listed 25 million units and offered generous incentives to investors participating in what was a poorly received deal. Investors in Spac’s IPOs have no way of knowing which company it will merge with and go public with.

The deal with Trump was lucrative. The 25 million units of the IPO were sometimes worth more than $ 1 billion on Thursday. Special incentives also boosted earnings.

Digital World has granted each hedge fund 150,000 sponsor shares of the so-called promoter to CEO Orlando and his team at a price of $ 0.0029 per share, which they can only sell after the Trump Media merger & Technology Group, the parent company of Truth Social. , closes. At an afternoon high of $ 51.90, those stocks that cost $ 435 were worth $ 7.7 million.

Since the opening bell Thursday, Digital World has been among the most traded stocks in the world, trading nearly 300 million shares, or $ 5 billion in volume at lunchtime.

“I guess it’s all the retail business that speculates and trades on the day,” said Julian Klymochko, Spac expert and founder of investment firm Accelerate Financial Technologies.

David Puritz of Shaolin Capital Management, a $ 1.1 billion fund that owns just under 10% of Digital World’s shares, told the Financial Times that “there is a lot of convexity built into the Spac product.” , which meant that its potential was almost limitless. but the trade had minimal potential for loss.

“When you partner with the right sponsor teams who have a clear vision for their goals, good things can happen quickly,” Puritz added.

A large investor in Spac’s IPO consortium called it one of the best deals of his career and said he was selling his position. Hedge funds will generally sell their Spac units if, after a deal is announced, the stock skyrockets. DE Shaw declined to comment, while other hedge funds listed as investors did not respond to messages seeking comment.

A hedge fund investor who owned nearly 10% of Digital World said he sold all the shares he could by early Thursday morning, before the stock price really moved.

“The idea that I would help [Trump] starting a fake news business called Truth makes me want to throw up, ”he said.

Some investors who missed the IPO nevertheless scented the opportunity.

Craig Samuels, a San Diego-based investor who has been buying Spacs for over a decade, said buying Spac on Thursday morning was like “being in a casino, walking past the craps table and throwing chips.”

The appeal, Samuels said, is that there is virtually no way to assess media activity from Trump, who offered no financial forecast in his presentation to investors.

“Who knows,” Samuels said, “we saw AMC Entertainment go to $ 70 and GameStop to $ 500. . . It’s an opportunistic game for momentum traders who use Trump’s cult status to manage the stock.

Samuels added, “Is it worth $ 5 billion today?” Doubtful. But it’s hard to quantify the value of the Trump brand.

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