Donald Trump’s social media company’s plans to merge with SPAC dealt a blow

Donald Trump’s social media company’s plans to merge with a special purpose acquisition company (SPAC) have been dealt a blow, according to Reuters, as the acquirer of the blank check failed to secure enough shareholder support for a one-year extension to close the deal.

In an exclusive, citing people familiar with the matter, Reuters noted that at stake was a $1.3 billion cash injection that Trump Media & Technology Group (TMTG), which operates the Truth Social app. former US president, is expected to receive from the Nasdaq-listed company. SPAC, Digital World Acquisition Corp, which signed an agreement last October to take TMTG public.

The deal was frozen amid civil and criminal investigations into the circumstances surrounding the deal. Reuters said Digital World had hoped the U.S. Securities and Exchange Commission (SEC), which is reviewing its disclosures about the deal, would now have given its blessing for the deal to go ahead.

READ: Trump-linked SPAC mobilizes against ‘Big Tech tyranny’

Most Digital World shareholders are individual investors and getting them to vote through their brokers has been difficult, Digital World chief executive Patrick Orlando said last week, Reuters reported.

Digital World needs 65% of its shareholders to vote in favor of the proposal to extend its life by 12 months for the move to become effective. By Monday evening, far fewer Digital World shareholders than required had voted in favor, its sources told Reuters.

The outcome of the vote is due to be announced at a special meeting of Digital World shareholders later on Tuesday, but Digital World executives do not believe they will be able to muster enough shareholder support in time and have begun to consider alternative options, the sources added, Reuters said.

One of the options being considered by Digital World is to extend the voting deadline with the end goal of bolstering shareholder support, the sources said. Without further action, SPAC is expected to be liquidated on Thursday and return the money it raised in its September 2021 IPO.

If Digital World fails in its attempt to get its shareholders to support the one-year extension, its management has the right to extend its term without shareholder approval for up to six months. It is unclear whether Digital World will pursue this option and whether that would give regulators enough time to come to a conclusion on whether to allow the deal to continue, Reuters said.

Digital World revealed that the SEC, the Financial Industry Regulatory Authority and federal prosecutors are investigating the deal with TMTG, although the exact scope of the investigations is unclear.

If the deal goes through, TMTG would receive $293 million that Digital World has on hand, plus $1 billion committed by a group of investors in the form of a private equity investment (PIPE). The PIPE is set to expire on September 20 unless the deal closes.

Digital World said it believed TMTG would have “sufficient funds” through April 2023. TMTG said last week that Truth Social was “on solid financial footing” and would soon begin serving ads.

Trump started using Truth Social in April, two months after it launched on Apple Inc’s App Store. He currently has more than 4 million followers – a fraction of the 89 million he had on Twitter Inc before he started. being banned for his role in the January 2021 US Capitol riots by thousands of his supporters.

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Cathy W. Howerton