The blank check company that planned to merge with former President Donald Trump’s struggling Truth Social business failed to garner enough shareholder support for a one-year extension to complete the deal, according Reuters.
Trump launched the Trump Media & Technology Group, which owns Truth Social, with plans for a $1.3 billion cash injection from Digital World Acquisition Corp., a special purpose acquisition company (SPAC). But the deal has been put on hold indefinitely as Digital World faces scrutiny from the Securities and Exchange Commission and the Justice Department over whether the company illegally negotiated the deal with Trump before handing it over. audience.
Digital World has asked its investors to approve a one-year extension to complete the merger following investigations, which the company said in a filing, “could materially delay, materially impede or prevent the completion of the business combination.” companies”.
The company needs 65% of its shareholders to extend the merger deadline, but as of Monday “significantly fewer Digital World shareholders than required had voted in favor,” according to Reuters. Most of the company’s shareholders are individual investors and it has been “difficult” to get them to vote through their brokers, Digital World CEO Patrick Orlando said last week, according to the report.
The vote threatens to kill the planned merger, and Digital World executives are already scrambling for alternative options, according to the report. The company may try to extend the voting deadline in an attempt to gain more shareholder support. Without further action, SPAC is expected to be liquidated on Thursday and return the money it raised from investors a year earlier.
Trump’s company was to withdraw $293 million from the deal as well as $1 billion in private investment. Meanwhile, Trump’s company has taken out tens of millions in loans, according to the report.
Trump downplayed the deal ahead of Monday’s vote on Truth Social, arguing that the company is “doing very well” despite widely reported financial difficulties. The former chairman accused the SEC of “attempting to harm” his merger partner and suggested he might line up private investors instead.
“I don’t need financing, ‘I’m really rich!’ “, he wrote. “Private company anyone???”
Trump says even if the deal falls through to go public with Truth Social, he doesn’t need funding because “I’m really rich!” pic.twitter.com/KW1sO0Nq2P
— Ron Filipkowski 🇺🇦 (@RonFilipkowski) September 3, 2022
Despite his wealth, Trump has largely funded his business ventures and presidential campaigns with other people’s money, racking up billions in debt that he doesn’t always repay.
Right-wing host Truth Social is threatening legal action against the company, accusing it of refusing to pay $1.6 million in contractually obligated payments, fox business reported last month, adding that the social network’s finances appear to be in “significant disarray”.
Digital World in SEC filings acknowledged that “a number of companies associated with [Trump] have filed for bankruptcy” and that “there is no guarantee that [Trump’s media company] also won’t go bankrupt.
In a filing in May, Digital World said Truth Social “may never generate operating revenue or achieve profitable operations” and “most likely will fail” if it does not address its risks.
The company has also faced numerous setbacks since its messy and glitchy launch last year. Last month, the U.S. Patent and Trademark Office denied Truth Social’s trademark application because the Trump company name was “confusingly similar” to other companies.
The company has also been blocked from the Google App Store due to its content moderation failures. Trump in his article on Truth Social insisted that “Google is doing well (I think?)”.
SEC filings show Truth Social still “has no guaranteed revenue stream and a questionable path to growth,” The Washington Post reported last week.
Digital World, meanwhile, is facing multiple federal investigations into whether it illegally negotiated the merger before going public in September 2021. The company said in June that it had been subpoenaed by a federal grand jury and was facing DOJ and SEC investigations that would delay the merger. And the company warned that growing Trump scandals posed a significant threat to the company.
“The value of the TMTG brand could decline if President Trump’s popularity were to suffer,” the company said in a filing last month. “Adverse reactions to publicity relating to President Trump, or the loss of his services, could have an adverse effect on TMTG’s revenues, results of operations and its ability to maintain or generate a consumer base, as well as on the outcome of the proposed business combination.”