Former President Donald Trump’s media company, Trump Media & Technology Group, announced in October 2021 that it would merge with Digital World Acquisition, a Miami-based company. The merger was well received by the stock market, as it was expected to create a tech giant worth up to $1.7 billion. However, the deal now faces a potentially catastrophic threat as the merger has been stalled for months.
Digital World has set a deadline of September 8th for the merger to close and has scheduled a shareholder vote to extend the deadline by another year. If the vote fails, Digital World will be required to liquidate and return $300 million to its shareholders, leaving Trump’s company with nothing.
The merger has faced numerous challenges from the start, including allegations that Digital World began conversations with Trump Media before they were allowed under SPAC rules. In addition, Digital World has experienced leadership changes, insider trading charges, and a settlement with the Securities and Exchange Commission.
The Washington Post has provided a detailed outline of its reporting to Digital World and Trump Media. Trump Media has filed a lawsuit against The Post for defamation over its coverage of the merger.
SPACs, or special purpose acquisition companies, raise money from investors to buy a private company before identifying their target. If the merger is not completed within the specified time, the SPAC must return the raised money to shareholders.
Digital World completed its IPO in September 2021 and set a termination date for the merger one year later. The company has asked shareholders to approve multiple extensions, but getting retail investors to participate in critical votes has been challenging.
Trump Media has blamed the SEC for the merger’s troubles, accusing the agency of sabotaging the deal for political reasons. However, the SEC has investigated Digital World and found that the company made material misrepresentations to investors.
In order to resolve the charges, Digital World has agreed to pay an $18 million settlement and revise its registration statement. However, the company has yet to resubmit the revised document to the SEC.
Digital World is also late in filing financial reports with the Nasdaq stock exchange and may risk being delisted.
The company has been urging shareholders to vote to stave off liquidation, but the future of the merger remains uncertain.
Overall, the merger between Trump Media and Digital World faces significant challenges and its ultimate outcome is still unknown.
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