Shares of Digital World Acquisition Corp (NASDAQ:DWAC) are down over 6% today after Kerrisdale Capital issued a short position.
Kerrisdale, founded by Sahm Adrangi, said it is short DWAC on expectations the company “will never secure regulatory approval to close its proposed merger with Trump Media & Tech Group.”
The report notes that DWAC “has much further to fall given the demonstrably misleading statements in DWAC’s registration statement, the status of TMTG’s operations at the time the merger agreement was executed, the cast of characters seeking to consummate that merger and those individuals’ flagrant disregard for SEC rules and regulations.”
Given the SEC’s ongoing focus on SPACs after a record year, Kerrisdale says DWAC is “a poster child for some of the worst abuses the investment vehicle has spawned.” As such, the regulator is likely to have a field day given that DWAC offers “textbook examples of the types of SPAC-related misconduct” that the SEC is working to shut down.
Adrangi’s firm sees “little reason” why the SEC would hesitate to kill the proposed merger given its ability to do so, as well as the action taken by the Commission on DWAC’s sponsor five years ago.
Moreover, Kerrisdale notes that several executives have already left Truth Social just weeks into the launch.
“The truth is becoming harder to deny: a deal already taking too long is likely headed for collapse,” it is said in the short report.
Kerrisdale has a price target of $10.00 on DWAC, signaling a downside of roughly 80% compared to yesterday’s closing price.
As of April 2021, Kerrisdale had around $750 million in assets under management.
By Senad Karaahmetovic