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Trump media deal suffers blow as SPAC fails to win extension

Stock Markets Sep 06, 2022 09:36PM ET
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© Reuters. The Truth social network logo is seen displayed behind a woman holding a smartphone in this picture illustration taken February 21, 2022. REUTERS/Dado Ruvic/Illustration
 
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By Echo Wang and Helen Coster

(Reuters) -The blank-check acquisition firm that agreed to merge with former U.S. President Donald Trump's social media company failed on Tuesday to secure enough shareholder support for a one-year extension to complete the deal.

At stake is a $1.3 billion cash infusion that Trump Media & Technology Group (TMTG), which operates the Truth Social app, stands to receive from Digital World Acquisition Corp, the special purpose acquisition company (SPAC) that inked a deal in October to take TMTG public.

The transaction has been on ice amid civil and criminal probes into the circumstances around the deal. Digital World had been hoping that the U.S. Securities and Exchange Commission (SEC), which is reviewing its disclosures on the deal, would have given its blessing by now.

Digital World Chief Executive Patrick Orlando told a special meeting of his shareholders on Tuesday he would push back to noon on Thursday the deadline for the vote on extending the life of the SPAC by 12 months.

Digital World needs 65% of its shareholders to vote in favor of the proposal, but the support as of late Monday fell far short, Reuters reported. Digital World did not disclose the margin on Tuesday.

Digital World shares ended trading in New York on Tuesday down 11.4% at $22.13.

Digital World is set to liquidate on Thursday and return the money raised in its September 2021 initial public offering to shareholders unless action is taken.

Digital World shareholders had been given more than two weeks to vote on the SPAC's extension and it is unclear if two additional days will make a difference. Most Digital World shareholders are individuals and getting them to vote through their brokers has been challenging, Orlando said last week.

Digital World said in a statement that if its shareholders do not approve the one-year extension on Thursday, its management plans to exercise its right to extend the life of the SPAC by three months unilaterally. The SPAC managers will lend $2.875 million to the SPAC as part of the arrangement, Digital World said.

The SPAC managers have the right to unilaterally extend the life of the SPAC one more time, till March. It is unclear whether this would provide enough time for regulators to reach a conclusion on whether to allow the deal to proceed.

A TMTG spokesperson said the company will continue cooperating with all stakeholders on the merger and that it hoped "the SEC staff will expeditiously conclude its review free from political interference."

An SEC spokesperson did not immediately respond to a request for comment.

Trump appeared to manage expectations for the deal with a post over the weekend on Truth Social: "I don't need financing, 'I'm really rich!' Private company anyone???"

Digital World has disclosed that the SEC, the Financial Industry Regulatory Authority and federal prosecutors have been investigating the deal with TMTG, though the exact scope of the probes is unclear.

The information sought by regulators includes Digital World documents on due diligence of potential targets other than TMTG, relationships between Digital World and other entities, meetings of Digital World's board, policies and procedures relating to trading, and the identities of certain investors, Digital World has said.

PIPE AT RISK

If the deal is completed, TMTG would receive $293 million that Digital World has on hand plus $1 billion committed from a group of investors in the form of a private investment in public equity (PIPE).

The PIPE is scheduled to expire on Sept. 20 unless the deal is completed. Investment bankers for Digital World have been reaching out to investors in the last few weeks to gauge their interest in extending the PIPE, a person familiar with the matter said.

It is unclear how TMTG is getting by without access to Digital World's funding. It raised $22.6 million through convertible promissory notes last year and another $15.4 million through bridge financing in the first quarter. The agreement with Digital World caps the indebtedness that TMTG can assume prior to the deal closing at $50 million.

Digital World has said it believes TMTG will have "sufficient funds" until April 2023. TMTG said last week that Truth Social is "on strong financial footing" and would begin running advertisements soon.

Trump started using Truth Social in April, two months after it launched on Apple Inc (NASDAQ:AAPL)'s app store. He has more than 4 million followers - a fraction of the 89 million he had on Twitter Inc (NYSE:TWTR) before he was banned over his role in the January 2021 U.S. Capitol riots by thousands of his supporters.

Trump media deal suffers blow as SPAC fails to win extension
 

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Comments (10)
Tyler Munro
Tyler Munro Sep 07, 2022 12:05AM ET
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actually, DWAC approved a 3 month merger deadline extention without shareholders permission. they are good till at least December 8th.
gab nea
gab nea Sep 06, 2022 6:18PM ET
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another business failure brought to you by the twice impeached, secrets stealing capt chaos!
G D
G D Sep 06, 2022 5:37PM ET
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Republicans should go to Russia to continue their business ventures over there.
Frank Mostertman
Frank Mostertman Sep 06, 2022 5:28PM ET
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the sick moran *******must be caged
Ac Tektrader
Ac Tektrader Sep 06, 2022 5:05PM ET
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joseph Goebbel the mMnister of Propaganda for the 3rd Reich, would gladly have supported Trump and his little platform.
Van Doza
Van Doza Sep 06, 2022 5:05PM ET
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What a troll.
Ac Tektrader
Ac Tektrader Sep 06, 2022 5:05PM ET
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Van Doza what's the matter dosa can't handle the truth about your little tin god. he's going down. it's time he served a little time.......
Ac Tektrader
Ac Tektrader Sep 06, 2022 4:59PM ET
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more right wing anti american drivel from a platform riddled with misinformation and lies. the ultimate echo chamber for the American fascist in the know.
John Laurens
John Laurens Sep 06, 2022 3:42PM ET
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More wokist drivel. I use Truth every day. It’s a great platform. I also use Rumble - another great app. If Musk doesn’t buy Twitter, I’ll delete it.
Norm Michaud
Norm Michaud Sep 06, 2022 1:59PM ET
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if it involves trump, it's a bad deal to begin with
First Last
First Last Sep 06, 2022 12:46PM ET
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Even Musk doesn't claim "most of their site is bots"
First Last
First Last Sep 06, 2022 12:46PM ET
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Twitter had a successful ipo.  Truthiness Social doesn't.  Not at all "extremely pertinent"
First Last
First Last Sep 06, 2022 12:46PM ET
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What % of posts on Truthiness Social is from bots?
First Last
First Last Sep 06, 2022 12:46PM ET
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"Musk's answer claimed that based on his analysis, "false or spam accounts" comprised 33% of visible accounts on the platform during the first week of July, and about 10% of its monetizable daily active users during the period." --  www.cnn.com/2022/08/09/tech/elon-musk-twitter-botometer/index.html
First Last
First Last Sep 06, 2022 12:38PM ET
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Another business failure to add to Trump's list.
First Last
First Last Sep 06, 2022 12:38PM ET
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Another nonsensical whataboutism
Chris Cummins
Chris Cummins Sep 06, 2022 12:38PM ET
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carlos guo  Carlos, if Trump had invested his Daddy's money in the S&P 500 he would be twice as rich today. All that work by this incompetent bozo has cost himself billions. All he had to do is sit back and relax and he would have been worth so much more.
First Last
First Last Sep 06, 2022 12:38PM ET
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Chris Cummins   Mark had a working-class background.  Mark didn't boast that his great business background would make him a great politician.  And Mark pays his bills so has no problem hiring lawyers.
Jeff Chevalier
Jeff Chevalier Sep 06, 2022 12:38PM ET
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What is rattling around in your head? You do realize that people can check out your BS.
 
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