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  "documentTitle": "Digital World Acquisition Corp (DWAC)",
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  "presentationDate": "2022-04-01 00:00:00",
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  "notes": "This is a research note from Kerrisdale Capital regarding a short thesis on DWAC.",
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      "text": "the SEC process to approve the merger is not on a near-term path to a favorable resolution; it has been irrevocably derailed, and the deal is effectively facing termination as the SEC investigation gathers steam.",
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      "text": "TMTG has limited operating history, one marginally functioning product, and no revenue. It has no proprietary technology. For reasons explained later in this report, it is highly improbable there is any lasting, binding contractual IP agreement between Trump and TMTG. Nevertheless, TMTG's forecasts breezily call for generating over $1.8bn in just 4 years based on capturing 50% of Twitter's monetizable daily active users and 40% of the Disney+ subscriber base.",
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      "text": "TMTG's stated mission is to \"fight for the First Amendment protections and freedom of all Americans, protect democracy, and defend capitalism.\" To do so, TMTG aspires to create \"a media powerhouse\" which disrupts the \"liberal bias and dangerous exercise of tech monopoly censorship\" allegedly practiced by Twitter, Facebook, Netflix, and Google.",
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      "text": "DWAC is a blank check company (aka Special Purpose Acquisition Company or SPAC) explicitly formed for the purpose of effecting a merger or similar business combination with one or more (theoretically unidentified) business targets.",
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      "text": "DWAC's merger is still pending regulatory and shareholder approval. In early December 2021, DWAC disclosed that its proposed merger is under investigation by the SEC and that it had received a request for information from FINRA related to trading activity preceding the public announcement of the agreement.",
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      "text": "In early September 2021, DWAC IPO'd at $10 per unit, generating gross proceeds of $287.5m. DWAC wasted little time in applying the newly raised cash, announcing a merger in October 2021 with TMTG, a private entity apparently owned and controlled by former President Donald Trump.",
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      "text": "Despite this mountain of red flags and risks, DWAC shares have continued to outperform in a weak tape for SPACs and speculative growth stocks. At the current price, DWAC's pro forma valuation stands at over $8bn, roughly one third the value of Twitter prior to news of Musk's stake in the platform.",
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      "text": "The transaction valued the proposed business combination at $875m, with potential earnouts depending on post-business combination stock price performance, bringing cumulative valuation up to $1.7bn. News of the proposed merger sent DWAC's stock price skyrocketing.",
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      "text": "Contrary to the views of bullish (uninformed) retail investors, the SEC process to approve the merger is not on a near-term path to a favorable resolution; it has been irrevocably derailed, and the deal is effectively facing termination as the SEC investigation gathers steam.",
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      "text": "In a move widely attributed to retail meme stock enthusiasm for TMTG, shares of DWAC increased at one point 17x to $175 before settling in the $60 range over the following month. In early December 2021, DWAC seized on this retail interest, announcing a $1bn PIPE investment from a group of unnamed institutional investors with terms that guarantee instant, virtually risk-free returns if the business combination is consummated (much more on this later).",
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      "text": "Two technology platforms form the \"foundation\" for TMTG: Truth Social, a Twitter-like social media platform that will be \"catalyzed by the existing Trump universe\" and launched (sort of) in February 2022, and TMTG+, a non-existent on-demand streaming service that will provide \"non-woke\" entertainment.",
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