Shareholders in a cash-rich front company on Tuesday approved a measure that gives the company an additional 12 months to complete its long-awaited merger with former President Donald J. Trump’s social media company.
The shareholder vote increases the likelihood that Trump Media & Technology Group will get at least $300 million in much-needed cash to run Truth Social – a right-leaning social media platform.
Truth Social has emerged as Mr. Trump’s main megaphone to attack his political opponents, as well as the federal prosecutors and state representatives who have brought four indictments against him. Online ads on the social media platform are also an important part of Mr. Trump’s fundraising efforts for his 2024 presidential campaign.
The shell company Digital World Acquisition Corporation raised $300 million in an initial public offering in September 2021. Just over a month later, the company, which was set up as a special purpose acquisition company, or SPAC, announced its merger deal with Trump Media.
If Digital World shareholders did not agree to the extension, the company would have to return the money raised in the IPO to shareholders on Friday.
SPAC is raising money from investors in the IPO in hopes of finding a private company to take over. Federal securities laws require SPACs to liquidate and return their funds to shareholders if the transaction cannot be completed within a specified period—often 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 following violent protests at the US Capitol on January 6, 2021.
The deal has been delayed by a regulatory investigation into allegations that Digital World misled investors about conversations it had with Trump Media ahead of its September IPO, which is prohibited by securities laws. Federal prosecutors also launched an investigation into allegations of insider trading in Digital World shares prior to the merger announcement in October 2021.
In July, Digital World reached a settlement with the Securities and Exchange Commission that required it to review certain regulatory filings and pay an $18 million fine if the merger was completed. Federal prosecutors have charged three men, including a former director of Digital World, with participating in a $22 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. Nevertheless, Mr. Orlando remains a major contributor to the digital world.
Digital World lobbied hard to convince shareholders – mostly retail investors – to agree to the measure to give the company more time to complete the merger. And it hired a consulting firm to encourage 65% of the company’s shareholders to vote in favor of the extension.
Trump Media also provided vote support, sending email alerts to Truth Social subscribers urging them to vote for the extension if they are also Digital World contributors.
“Thank you for all the outstanding support,” Digital World CEO Eric Swader said on the Truth Social shortly after the result of the vote on the extension was announced. “Please understand my silence. We remain focused on the task at hand and watch every word we say.”
Chad Nedohin, a digital investor who has been an outspoken supporter of the merger, credited SPAC shareholders with getting approval for the extension, calling them “really impressive activists.” Hosted by Mr. Ndohin A Weekly video show Called “DWAC’D” on Rumble, it is a conservative streaming media site that is a business partner of Trump Media.
Integration still faces obstacles.
In early August, Trump Media recommitted to completing the deal only after it received new terms that would strengthen Mr. Trump’s control of the combined company. The revised agreement with Trump Media expects to close the merger by the end of December. Mr. Trump’s company could also terminate the agreement earlier, if Digital World cannot meet the October 9 deadline for filing amended regulatory filings.
If the deal is completed, Mr Trump would be the largest shareholder in the newly combined company, owning up to 70 million shares, according to a regulatory filing.
Digital World shares jumped after the company announced the vote result, closing up 3.6 percent. With a market valuation of more than $600 million, post-merger Trump Media will be one of Mr. Trump’s most valuable assets.
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