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Wednesday, February 21, 2024

Trump Media Deal Suffers a Setback as SPAC Is Unsuccessful in Obtaining Extension

The purchase has been put on hold while ongoing civil and criminal investigations into the transaction's circumstances

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UNITED STATES: To finalize the merger with former U.S. President Donald Trump’s social media company, the acquisition firm that signed a blank-check agreement with him could not win enough shareholder approval on Tuesday.

A $1.3 billion capital injection from Digital World Acquisition Corp (DWAC.O), the Special Purpose Acquisition Company (SPAC) that signed a deal in October to purchase Trump Media & Technology Group (TMTG), which runs the Truth Social app, is at risk. TMTG is the owner of the Truth Social app.

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The purchase has been put on hold while ongoing civil and criminal investigations into the transaction’s circumstances. The U.S. Securities and Exchange Commission (SEC), which is examining Digital World’s disclosures on the deal, had hoped to have approved the transaction by this point.

Patrick Orlando, the chief executive of Digital World, announced on Tuesday that he would postpone the deadline for the vote on extending the SPAC’s existence by a year until noon on Thursday.

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To pass the proposal, Digital World needs 65% of its shareholders to vote in favour, but as of late Monday, the support was far below that threshold. On Tuesday, Digital World opted not to share the margin.

Tuesday’s trade in New York saw a decline of 11.4% in the price of Digital World shares to $22.13.

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If no action is taken, Digital World will liquidate on Thursday and return the funds raised in its September 2021 initial public offering to stockholders.

It is uncertain whether two extra days will make a difference because shareholders of Digital World had more than two weeks to cast their votes on the SPAC’s extension. Orlando stated last week that it has been challenging to convince the majority of Digital World shareholders to vote through their brokers because they are primarily private investors.

In a statement, Digital World stated that its management intended to utilize its authority to unilaterally prolong the term of the SPAC by three months if its shareholders did not agree to the one-year extension on Thursday. In accordance with the agreement, the SPAC managers will lend the SPAC $2.875 million, according to Digital World.

Also Read: Key Trump Lawyers to Be Used as Witnesses or Targets in FBI Probe

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