By Matthew Goldstein
Shareholders of a cash-rich shell company approved a measure that will give the firm 12 additional months to complete its long-delayed $US1.3 billion ($2 billion) merger with former President Donald Trump’s social media company.
The shareholder vote increases the likelihood that Trump Media & Technology Group will get access to at least $US300 million in badly needed cash to operate Truth Social — a right-leaning social media platform.
Truth Social has emerged as Trump’s primary megaphone for railing against his political opponents, as well as the federal and state prosecutors who have brought four indictments against him. Online ads on the social media platform also account for a critical piece of Trump’s fundraising effort for his 2024 presidential campaign.
The shell company, Digital World Acquisition Corp, raised the $US300 million in a September 2021 initial public offering. A little over a month later, the company, set up as a special purpose acquisition company, or SPAC, announced the deal to merge with Trump Media.
If Digital World shareholders had not approved the extension, the company would have had to return the money raised in its IPO to shareholders on Friday.
A SPAC raises money from investors in an IPO in the hopes of finding a private company to acquire. Federal securities laws require SPACs to liquidate and return their cash to shareholders if a deal cannot be completed in a specified period — often two years.
The merger was announced when Truth Social was still in the planning stages and Trump was banned from posting on most social media platforms after the violent protests at the US Capitol on January 6, 2021.
The deal had been delayed by a regulatory investigation into allegations that Digital World misled investors about talks it held with Trump Media before its September IPO, which is prohibited by securities laws. Federal prosecutors also started an investigation into allegations of insider trading in Digital World shares in advance of the October 2021 merger announcement.
In July, Digital World reached a settlement with the Securities and Exchange Commission that required it to revise a some regulatory filings and to pay an $US18 million penalty if the merger was completed. Federal prosecutors have charged three men, including a former Digital World director, with taking part in a $US22 million insider-trading scheme.
In the run-up to the regulatory settlement, Digital World ousted its original CEO and main promoter, Patrick Orlando, and revamped its board. Orlando, however, remains a large Digital World shareholder.
Digital World had lobbied hard to get shareholders — most of whom are retail investors — to approve the measure to give the company more time to complete the merger. It hired an advisory firm to encourage 65 per cent of the company’s shareholders to vote for the extension.
Trump Media also lent 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 of the outstanding support. Please understand my silence. We remain focused on the task at hand and are watching every word we say,” Eric Swider, Digital World’s CEO, said on Truth Social shortly after the result of the vote on an extension was announced.
The merger still faces hurdles.
In early August, Trump Media recommitted itself to completing the deal only after it received new terms that would strengthen Trump’s control over the merged company. The revised agreement with Trump Media anticipates the merger closing by the end of December. Trump’s company also can terminate the agreement before then if Digital World cannot meet an October 9 deadline for submitting amended regulatory filings.
If the deal is completed, Trump will be the newly merged company’s largest shareholder.
Shares of Digital World jumped after the company announced the result of the vote. With a market valuation of well over $US600 million, post-merger Trump Media would be one of Trump’s most valuable holdings.
This article originally appeared in The New York Times.
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