Buyer of Trump’s Truth Social Gets More Time to Complete Merger
Shareholders of a cash-rich shell company approved a measure on Tuesday that will give the firm 12 additional months to complete its long-delayed merger with former President Donald J. Trump’s social media company.
The shareholder vote increases the likelihood that Trump Media & Technology Group will get access to at least $300 million in badly needed cash to operate Truth Social — a right-leaning social media platform.
Truth Social has emerged as Mr. Trump’s primary megaphone for railing against his political opponents, as well as the federal and state prosecutors who have brought four indictments against him. Online ads on the social media platform also account for a critical piece of Mr. Trump’s fund-raising effort for his 2024 presidential campaign.
The shell company, Digital World Acquisition Corporation, raised the $300 million in a September 2021 initial public offering. A little over a month later, the company, set up as a special purpose acquisition company, or SPAC, announced the deal to merge with Trump Media.
If Digital World shareholders had not approved the extension, the company would have had to return the money raised in its I.P.O. to shareholders on Friday.
A SPAC raises money from investors in an I.P.O. in the hopes of finding a private company to acquire. Federal securities laws require SPACs to liquidate and return their cash to shareholders if a deal cannot be completed in a specified period — often two years.
The merger was announced when Truth Social was still in the planning stages and Mr. Trump was barred from posting on most social media platforms after the violent protests at the U.S. Capitol on Jan. 6, 2021.
The deal had been delayed by a regulatory investigation into allegations that Digital World misled investors about talks it held with Trump Media before its September I.P.O., which is prohibited by securities laws. Federal prosecutors also started an investigation into allegations of insider trading in Digital World shares in advance of the October 2021 merger announcement.
In July, Digital World reached a settlement with the Securities and Exchange Commission that required it to revise a some regulatory filings and to pay an $18 million penalty if the merger was completed. Federal prosecutors have charged three men, including a former Digital World director, with taking part in a $22 million insider trading scheme.
In the run-up to the regulatory settlement, Digital World ousted its original chief executive and main promoter, Patrick Orlando, and revamped its board. Mr. Orlando, however, remains a large Digital World shareholder.
Digital World had lobbied hard to get shareholders — most of whom are retail investors — to approve the measure to give the company more time to complete the merger. It hired an advisory firm to encourage 65 percent of the company’s shareholders to vote for the extension.
Trump Media also lent support to the get out the vote, sending email alerts to Truth Social subscribers urging them to vote for the extension if they were also Digital World shareholders.
“Thank you for all of the outstanding support,” Eric Swider, Digital World’s chief executive, said on Truth Social shortly after the result of the vote on an extension was announced. “Please understand my silence. We remain focused on the task at hand and are watching every word we say.”
Chad Nedohin, a Digital World investor who has been vocal proponent of the merger, credited the SPAC’s shareholders with getting the extension approved, calling them “truly impressive activists.” Mr. Nedohin hosts a weekly video show called “DWAC’D” on Rumble, a conservative streaming media site that is a business partner of Trump Media.
The merger still faces hurdles.
In early August, Trump Media recommitted itself to completing the deal only after it received new terms that would strengthen Mr. Trump’s control over the merged company. The revised agreement with Trump Media anticipates the merger closing by the end of December. Mr. Trump’s company also can terminate the agreement before then, if Digital World cannot meet an Oct. 9 deadline for submitting amended regulatory filings.
If the deal is completed, Mr. Trump will be the newly merged company’s largest shareholder, owning as much as 70 million shares, according to a regulatory filing.
Shares of Digital World jumped after the company announced the result of the vote. With a market valuation of well over $600 million, postmerger Trump Media would be one of Mr. Trump’s most valuable holdings.
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