Trump’s Truth Social SPAC faces key shareholder vote

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Former President Donald Trump’s Truth Social website is heading for a financial cliff that could see its main lifeline disappear.

A Trump-allied investment firm, Digital World Acquisition Corp., this week asked shareholders to approve a one-year extension for its merger with Trump’s company while it fends off several federal investigations.

But at a special meeting on Tuesday, company executive Patrick Orlando abruptly pushed back the announcement of the vote until Thursday, saying he wanted to give shareholders more time to react. Reuters first reported on Tuesday that the company did not have the votes.

If 65% of the company’s shareholders don’t approve the extension by Thursday, the company could be forced to liquidate, a potentially devastating blow that would leave Truth Social with nothing.

The company can postpone the merger for six months without shareholder approval, but its executives would have to invest millions to keep the company afloat. Some investment analysts have said they doubt the extension gives the company enough time to resolve any outstanding merger concerns.

Digital World, a Special Purpose Acquisition Company, or SPAC, debuted to massive attention last year. But the federal review, the lackluster launch of the Trump site and other issues sapped much of the market excitement.

Digital World’s stock price fell more than 11% on Tuesday, to close at $22.13, nearly 90% below its peak of $175 last October. In the event of the company’s liquidation, all shareholders – including those who bought at very high prices – would receive approximately $10 per share.

Truth Social faces financial peril as concern over Trump’s future grows

In this case, Trump’s start-up Trump Media & Technology Group, of which Truth Social is the main product, will not be able to tap into the approximately $1.3 billion investment it has relied on since the initial offering. of Digital World last September.

The Trump startup has meanwhile survived on tens of millions of dollars in short-term loans. The company is also facing a dispute with a conservative web hosting service over alleged unpaid bills.

The Securities and Exchange Commission and Financial Industry Regulatory Authority are investigating Digital World, including whether the company negotiated its deal with Trump before its public offering, which may violate securities law. A federal grand jury also sought information from Trump’s company.

Without SEC approval, any deal is terminated indefinitely.

Digital World has long celebrated that many of its shareholders are small investors, known as retail investors, who purchased the shares for financial or personal reasons and are not part of a larger investment.

But the possible failure of the vote highlights the risks of such financing, given that ordinary shareholders may not follow financial statements closely and must be persuaded to vote en masse.

FBI attacker contributed prolifically to Trump’s Truth Social website

“There are a lot of retail investors who don’t pay much attention, or they don’t know what to do,” said Michael Ohlrogge, associate law professor at New York University. “Or they may be thinking, ‘Hey, I’d rather this merger happen sooner than later,’ not realizing that the only reason they’re asking this is because there’s a good chance they can’t. complete the merge at all.”

That investor apathy wouldn’t necessarily be a killer blow, Ohlrogge said, because the company could pay to extend the merger deadline and try again in six months. But it could also raise deeper questions about the company’s ability to survive.

“The big question becomes, why is it taking them so long to close the deal?” he said. “It’s kind of surprising to me that it’s so difficult for them ‘to meet the SEC requirements,’ he added, ‘unless they’re pursuing one of these Trump-type legal strategies. consisting of fighting tooth and nail against any kind of legal authority.”

Orlando was quick to alert shareholders to the company’s need to vote. On his Truth Social account, he posted or reposted — or “truthful” and “re-truthful,” in the site’s jargon — nearly 30 messages over the past week calling on people to vote.

Last week, the company urged shareholders to open their email inboxes for voting details: “PLEASE REMEMBER TO CHECK YOUR SPAM FOLDER,” said an announcement filed with the SEC. Orlando also recorded an interview, posted on Rumble, a conservative video site that provides support services to Truth Social, in which he detailed how investors should vote.

The host of the call, a Christian cult leader named Chad Nedohin, urged his fellow “DWAC family” investors to “get those votes,” saying, “We consider ourselves the diamond hands of all diamond hands. The video has been viewed approximately 500 times.

The company’s executives own about 18% of the shares and will vote for approval, they said in a filing with the SEC, but they will need many more votes than that to meet the 65% threshold. Orlando said on the Rumble call that retail investor turnout in votes like this is closer to around 25%.

Trump’s new business partner: A Chinese company with a history of SEC investigations

Truth Social is the centerpiece of Trump Media & Technology Group, the startup Trump launched after losing the White House and which he boasted could become one of the biggest players in media, rivaling… giants like Disney and Facebook.

Trump sought to portray everything as going as planned. On Saturday, he posted on Truth Social that the site is “doing great,” despite federal investigations, and said, “Anyway, I don’t need funding, ‘I’m really rich!’ Private company anyone??? (The actual size of Trump’s wealth is disputed; the self-proclaimed ‘debt king’ has been linked to six corporate bankruptcies.)

On Tuesday, ahead of the special meeting, Trump said the site was “working amazingly” and had become “the most engaged social media platform on the internet!” In every measure of online engagement, however – web traffic, downloads, number of subscribers – the site remains a tiny fraction of more traditional sites and has even fallen since its launch six months ago. In the same article, Trump encouraged companies to buy ads on the site.

In a statement last week to pro-Trump blog Just the News, the Trump startup said Truth Social was “on solid financial footing” and that “any claims to the contrary are knowingly false bar talk.”

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