The shareholders of a cash-rich shell company have approved a measure granting the firm an additional 12 months to finalize its long-delayed merger with former President Donald J. Trump’s social media company. This approval significantly increases the chances of Trump Media & Technology Group gaining access to essential funds amounting to at least $300 million, which are crucial for the operation of Truth Social, a right-leaning social media platform.
Truth Social has become Mr. Trump’s primary platform for expressing his views on political opponents and criticizing federal and state prosecutors who have brought multiple indictments against him. Additionally, online ads on this platform play a vital role in Mr. Trump’s fundraising efforts for his upcoming 2024 presidential campaign.
Digital World Acquisition Corp., the shell company, raised $300 million through an initial public offering in September 2021. Just over a month later, the company, established as a special purpose acquisition company (SPAC), announced its intention to merge with Trump Media.
If the extension had not been approved by Digital World shareholders, the company would have been obliged to return the raised funds to shareholders. Such action is dictated by federal securities laws governing SPACs, which require the liquidation of the company and the return of cash to shareholders if a merger cannot be completed within a specified period, typically two years.
The merger was initially announced when Truth Social was still in the planning stages, and Mr. Trump was facing bans from most social media platforms following the violent protests at the U.S. Capitol in January 2021. However, the merger process was delayed due to a regulatory investigation into allegations that Digital World misled investors about its talks with Trump Media prior to the IPO, which is prohibited by securities laws. Federal prosecutors also launched an investigation into allegations of insider trading in Digital World shares ahead of the October 2021 merger announcement.
In July, Digital World reached a settlement with the Securities and Exchange Commission, compelling the company to revise certain regulatory filings and pay an $18 million penalty if the merger is completed. Furthermore, federal prosecutors have filed charges against three individuals, including a former Digital World director, for their involvement in a $22 million insider trading scheme.
Prior to the regulatory settlement, Digital World replaced its original CEO and main promoter, Patrick Orlando, and made significant changes to its board. However, Orlando still holds a significant stake in Digital World. The company made extensive efforts to persuade its shareholders, who are predominantly retail investors, to approve the extension. It enlisted the support of an advisory firm, which worked towards securing a 65% approval rate for the extension.
Trump Media also played a role in encouraging shareholder participation by sending out email alerts to Truth Social subscribers who were also Digital World shareholders, urging them to vote in favor of the extension. Following the announcement of the extension’s approval, Eric Swider, Digital World’s CEO, expressed gratitude for the support on Truth Social, emphasizing their focused dedication to the task at hand while being cautious with their communication.
However, there are still challenges to overcome before the merger can be finalized. In early August, Trump Media reaffirmed its commitment to completing the deal, but only under revised terms that would strengthen Mr. Trump’s control over the merged company. The revised agreement anticipates the merger’s closure by the end of December, with an Oct. 9 deadline set for Digital World to submit amended regulatory filings. If this deadline is not met, Trump’s company reserves the right to terminate the agreement.
Upon completion of the merger, Mr. Trump will become the largest shareholder of the newly merged company. The announcement of the vote’s outcome led to a surge in Digital World’s shares. With a market valuation well exceeding $600 million, the post-merger Trump Media would become one of Mr. Trump’s most valuable assets.
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