Lighthouse Investment hedge fund sells stake in Trump SPAC firm DWAC after merger news, big stock price rise

At least one hedge fund sold off its stake in a SPAC after that firm announced plans to merge with the social media company planned by former President Donald Trump.

Lighthouse Investment Partners, one of at least nine hedge funds to hold stakes in the SPAC, shed its holdings in Digital World Acquisition after learning of the merger, the fund told CNBC on Friday.

“Lighthouse was not aware of the pending merger and no longer holds unrestricted shares of the SPAC,” the fund said.

Lighthouse had owned 3.2 million shares, or 11.2% of the SPAC, according to a Sept. 30 regulatory filing. 

The sell-off came as Digital World Acquisition Corp., saw a huge rise in the price of its stock price Thursday on the heels of the merger news.

DWAC shares spiked more than 100% on Friday after the stock more than quadrupled in price in the previous session.

It is not clear if the hedge fund sold to book profits from its stake in DWAC, or if it was worried about the risk of being associated with Trump, who as president was impeached twice and accused of inciting the deadly Jan. 6 Capitol riot by his supporters.

D.E. Shaw owned 8% of the SPAC, or 2.4 millions of shares, while ARC Capital held a near 18% stake, or 6.6 million shares, according to regulatory filings. Saba Capital Management, Highbridge Capital Management, Lighthouse Investment Partners, K2 Principal Fund, Atw Spac Management, Boothbay Fund Management and RG Capital Management were also big early investors of the SPAC.

The hedge funds’ DWAC holdings were based on regulatory filings from September before the merger target was announced and they don’t necessarily reflect their stakes right now.

Highbridge Capital Management and Atw Spac Management declined to comment, and the rest of the hedge funds didn’t immediately respond to CNBC’s requests for comment.

One of the funds listed a major investor in DWAC is ARC Global Investments II, LLC. The managing member of ARC Global is listed in a regulatory filing as Patrick Orlando, who is also the CEO of DWAC.

On Thursday, in an 8-K filing with the Securities and Exchange Commission, DWAC said it had entered into an agreement and plan of merger with DWAC Merger Sub Inc., which is a wholly owned subsidiary of DWAC, and with Trump Media & Technology Group and ARC Global Investments II.

SPACs are special purpose acquisition companies, also known as blank-check companies, which are created to raise capital from public equity markets, and then use that cash to merge with a private company that has or will have an actual operating business.

The stock of that merged firm then will trade under the stock ticker created by the SPAC.

Investors in SPACs as a rule do not know the identity of the other firm that will be targeted for merger.

Trump’s company, the so-far-unlaunched Trump Media & Technology Group, said in an announcement Wednesday that its “mission is to create a rival to the liberal media consortium and fight back against the ‘Big Tech’ companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America.”

Trump was banned by Twitter, his favorite social media platform, and by Facebook earlier this year after he was accused of sparking the invasion of the Capitol.

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