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When former President Donald Trump’s media start-up announced in October 2021 that it planned to merge with a Miami-based company called Digital World Acquisition, the deal was an instant stock market success.
With the $300 million that Digital World had already raised from investors, Trump Media & Technology Group, founder of the pro-Trump social network Truth Social, promised at the time that the merger would create a tech titan worth initially The stock’s performance would be $875 million, later up to $1.7 billion.
All they needed was for the merger to be completed – a process that Digital World said in a July 2021 preliminary prospectus would take place within 12 to 18 months.
“Everyone asks me why someone doesn’t stand up to Big Tech? Well, we will be soon!” Trump said in one Trump Media statement this month.
Now, nearly two years later, the deal faces potentially catastrophic danger. With the merger stalled for months, Digital World is fast approaching the Sept. 8 deadline to complete the merger and has scheduled a shareholder vote for Tuesday to extend the deadline by another year.
If the vote fails, Digital World is legally required to liquidate and return $300 million to its shareholders, leaving Trump’s company with nothing from the transaction.
For Digital World, it would mark the final financial downfall for a special purpose acquisition company (SPAC) whose proximity to the former president made it one of the stock market’s once hottest deals. The share price, which peaked at $175 in the first few hours, has since fallen to around $14.
Digital World’s efforts to merge with Trump Media were problematic almost from the start, amid allegations that the company began its discussions with the former president’s company before they were permitted under SPAC rules.
Then, last year, the problems became increasingly clear: the CEO was fired by the board, a former board member was arrested on insider trading charges, and the company agreed to pay an $18 million settlement to settle the allegations against him Allegations to be clarified Investors were misled and false information was provided to the Securities and Exchange Commission.
The merger was “pretty much unprecedented in terms of all the mishaps,” said Jay Ritter, a finance professor at the University of Florida who studies stock markets. “The deal seems to be running out of time. You can’t get extensions forever.”
The Washington Post provided Digital World and Trump Media with a detailed overview of their reporting on this article.
Shannon Devine, a spokeswoman for Trump Media, who has sued The Post in ongoing litigation for defamation over its earlier coverage of the merger, said in a statement: “After repeatedly defaming TMTG with false accusations that it has still not retracted, The Washington Post adds to its pile of bias with this new collection of defamatory and self-critical writing.” more added. They refute falsehoods and prove once again why it is a terrible mistake for anyone to believe a word they read in this publication.”
The statement did not identify any specific inaccuracy in this story, but Trump Media has alleged in its lawsuit that The Post previously falsely reported that Trump Media paid a finder’s fee on a loan it received to a company in which the former CEO of Digital World was involved.
The SEC declined to comment.
SPACs are known as “blank check” companies because they raise money from investors to buy a private company before identifying who they want to target. Once the SPAC has decided on its target and announced it, it works to merge with that company and take it public, thereby bypassing some of the requirements of a more traditional initial public offering or initial public offering.
If the SPAC cannot complete the merger within the deadline it sets, it must return the money it raised to shareholders.
Digital World completed its initial public offering on September 8, 2021 and set a “completion date” for the merger to close one year later, SEC filings said. Then, last August, Digital World said in a filing that its board believed it did not have enough time to complete the merger and asked shareholders to approve up to four three-month extensions.
Afterwards, those responsible at Digital World organized an intensive event As part of the get-out-the-vote campaign, shareholder meetings were postponed six times to secure sufficient investor support. After securing millions of dollars in funding from its corporate sponsor ARC Global Investments II, the company was finally able to extend its deadline to September 8 of this year.
Digital World needs 65 percent of the shares from its almost 400,000 investors to vote “yes” to the extension of the deadline; Shares without voting rights are counted as “no” votes. Should the extension fail, Digital World said in a document filed in July that it would “cease all operations except for the purpose of winding up” and refund investors at a price of about $10.24 per share – wide below what many shareholders paid.
Votes on extensions like this are almost always approved because SPAC shares are typically bought by professional or institutional investors who closely follow the progress of a deal, Ritter said.
However, Digital World’s shareholder base largely consists of small “retail” investors, making it more difficult for the company to increase shareholder participation in key votes. Ritter said he suspects those investors, many of whom bought shares out of love for Trump or loyalty to his brand, may not be paying attention as the liquidation deadline approaches.
Trump Media blamed the SEC for problems with the deal, saying in a statement last year that the agency worked to “sabotage” the merger for political reasons with “a bureaucratic black hole of inaction.”
But the SEC, which requires SPACs to meet disclosure requirements and other closing conditions before approving a merger, said in July it was investigating Digital World and found that it had made “material misrepresentations” to investors.
In filings dating back to the IPO in September 2021, Digital World executives said they had not engaged in merger discussions with any company, although in fact they had begun talking to Trump Media executives months earlier, in violation of represents federal anti-fraud guidelines, the SEC said in the statement.
When Digital World agreed to pay an $18 million settlement for misrepresentations if the merger was completed, it said it would revise its registration statement, known as Form S-4, to correct inaccuracies . The company has not yet refiled that revised document, SEC filings show.
In a separate filing, Digital World said it was also unwilling to file two required quarterly financial reports for the first half of this year because it could not complete them on time without “undue burden or expense.” In SEC filings and letters, the company has argued with its former auditors over who is responsible for missing information.
Digital World was also late in filing two required quarterly financial reports with the Nasdaq exchange, the company said, adding that Nasdaq had given the company until November to file the reports or risk being delisted .
In a flurry of communications to shareholders, the company has urged investors to vote to avert liquidation. “Time is running out. Don’t delay,” one mailer said in underlined font. “DON’T THROW THIS AWAY.”
Digital World CEO Eric Swider said in a statement to The Post that most of the reporting in this article was “inaccurate or outright misleading,” but only four provided concrete answers, arguing that the notion that the deal is on the verge of a catastrophe is “inaccurate”. nowhere near the truth”; that the company is not “looking for ‘hype'” and that he denied the existence of a quote attributed to him in a company statement as well as the meaning of one of his Truth Social posts.
Swider has been posting “URGENT!!” for the past few days. News on Truth Social urging shareholders to vote. In one post he wrote: “As Democrats will tell you; Management says vote early, vote often. Bring all your friends.” Swider told The Post the quote had “nothing to do with the digital world.” The post was written three days after Digital World’s last shareholder meeting was postponed, with an official filing quoting Swider as saying, “Our SPAC is at a crucial crossroads.”
In another company statement on August 22, Swider was quoted as saying, “A vote for extension is a vote for free speech.” When Swider told the Post he planned to include the quote in this story, he said in one Email: “I don’t think this is accurate.” Days before the shareholder vote, the statement remained online.
Trump, who would retain his 90 percent stake in Trump Media if the deal falls through, has not yet mentioned the shareholder vote on his own Truth Social account.
Truth Social has attracted a relatively small following. Although Trump Media predicted in an investor presentation in 2021 that the site would have a total of 41 million users by the end of that year, usage estimates from Similarweb, a data company that analyzes web traffic, suggest that goal is far from being reached.
Similarweb estimates that about 500,000 monthly active users in the U.S. visited Truth Social through its mobile apps for Apple and Android in July, compared to 600,000 in June.
Similarweb’s estimate of how many people in the United States visited Truth Social from a desktop computer or their phone’s web browser in July was just over 1 million, down nearly 20 percent since June. (There is some overlap, as users can access the site on both their desktop and their phones.) Three times as many unique visitors visited The Old Farmer’s Almanac and Denver Gazette websites in July, Similarweb estimates show.
Trump Media also hasn’t unveiled other offerings it has been promoting in 2021, such as a subscription video service, TMTG+, that would offer “non-wake” entertainment. In his campaign filings, Trump estimated the company’s value at between $5 million and $25 million.
In recent weeks, Trump has used Truth Social to blast some of the officials connected to his four criminal indictments.
However, the site missed out on some advertising opportunities. When Trump sat in for an interview with former Fox News host Tucker Carlson to counter the Republican primary debate, the video aired not on Trump’s own social network but on X, formerly known as Twitter.
Trump had told his advisers he didn’t want the video to end up on a Truth Social competitor, but Carlson’s team argued that Trump’s platform didn’t have the reach it needed, people familiar with the negotiations said told the Washington Post.
Truth Social’s key feature — the exclusivity of Trump’s online thoughts — may be facing a threat of its own. On August 24, Trump posted his first tweet in more than two years after turning himself in at an Atlanta jail on felony charges of participating in a criminal conspiracy to overturn his 2020 election defeat , including his mugshot.
On Truth Social, some users expressed frustration over what they described as a betrayal of their pro-Trump corner of the internet. A user with the username “45MAGA2022” posted on Truth Social the night the interview aired: “How is this tweet somewhat beneficial to the merger agreement and/or #Truth?”
However, Trump said he wasn’t going anywhere and that Truth Social was his “home.” In a post there on Monday, he wrote: “TRUTH SOCIAL IS THE LARGEST AND HOTTEST COMMUNICATION FORM, SYSTEM AND LARGEST PLATFORM OF COMMUNICATIONS IN AMERICA AND IN THE WORLD TODAY.” That’s why I use it – there’s nothing even close arrives!!!”