Shareholders of a cash-rich shell company approved a proposal Tuesday that would give the company 12 additional months to complete its long-delayed merger with former President Donald J. Trump’s social media company.
The shareholder vote raises the possibility that Trump Media & Technology Group will get access to at least $300 million in much-needed cash to run Truth Social — a right-leaning social media platform.
Truth Social has emerged as the main megaphone of Mr. Trump for complaining against his political opponents, as well as federal and state prosecutors who brought four indictments against him. Online ads on the social media platform also represent a critical part of Mr. Trump’s fundraising efforts for his 2024 presidential campaign.
The shell company, Digital World Acquisition Corp., raised $300 million in an initial public offering in September 2021. A little later, the company, set up as a special purpose acquisition company, or SPAC, has announced a deal to merge with Trump Media.
If Digital World’s shareholders do not approve the extension, the company will have to return the money raised in its IPO to shareholders on Friday.
A SPAC raises money from investors in an IPO in hopes of finding a private company to acquire. Federal securities laws require SPACs to liquidate and return their money to shareholders if a deal is not completed within a specified period – usually two years.
The merger was announced when Truth Social was still in the planning stages and Mr. Trump was banned from posting on most social media platforms after violent protests at the US Capitol in Jan. 6, 2021.
The deal has been delayed by a regulatory investigation into allegations that Digital World misled investors about talks it had with Trump Media ahead of its September IPO, which is prohibited by securities laws. Federal prosecutors also began investigating 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 requiring it to amend certain regulatory filings and pay an $18 million fine if the merger is 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 reshuffled its board. Mr. Orlando, however, remains a large Digital World shareholder.
Digital World lobbied hard to get shareholders – most of them retail investors – to approve the bill to give the company more time to complete the merger. It hired an advisory firm to persuade 65 percent of the company’s shareholders to vote for the extension.
Trump Media also provided support to 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 the outstanding support. Please understand my silence. We remain focused on the task at hand and watch every word we say,” Eric Swider, chief executive of Digital World, told Truth Social shortly after announcing the result of the vote on an extension.
Chad Nedohin, a Digital World investor who has been a vocal proponent of the merger, credited the SPAC’s shareholders with approving the extension, calling them “truly wonderful 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.
Integration still faces obstacles.
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 combined company. The revised agreement with Trump Media anticipates closing the merger by the end of December. Mr. Trump’s company could also terminate the deal before then, if Digital World misses an Oct. 9 deadline for submitting amended regulatory filings.
If the deal is completed, Mr. Trump will be the largest shareholder of the newly combined company, owning up to 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 more than $600 million, post-merger Trump Media will be one of Mr. Trump’s most valuable assets. Trump.
