Exclusive: Trump’s partner for Truth Social fails to win support for SPAC extension

The Truth social network logo is seen on a smartphone in front of a screen of former US President Donald Trump in this illustration taken February 21, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

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Sep 5 (Reuters) – The blank check acquisition firm that agreed to merge with Donald Trump’s social media company has failed to win enough shareholder support for a one-year extension to close the deal, people familiar with the matter said on Monday.

At stake is a $1.3 billion cash injection that Trump Media & Technology Group (TMTG), which operates the former US president’s Truth Social app, is expected to receive from Digital World Acquisition Corp. (DWAC.O)the Special Purpose Acquisition Company (SPAC) which signed an agreement last October to take TMTG public.

The deal was frozen amid civil and criminal investigations into the circumstances surrounding the deal. Digital World had hoped the U.S. Securities and Exchange Commission (SEC), which is reviewing its disclosures about the deal, would have now given its blessing for the deal to go ahead.

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Most Digital World shareholders are individual investors and getting them to vote through their brokers has been difficult, Digital World chief executive Patrick Orlando said last week.

Digital World needs 65% of its shareholders to vote in favor of the proposal to extend its life by 12 months for the move to become effective. By Monday evening, far fewer Digital World shareholders than required had voted in favor, the sources said.

The outcome of the vote is expected to be announced Tuesday at a special meeting of Digital World shareholders. Digital World executives do not believe they will be able to muster enough shareholder support in time and have begun to consider alternative options, the sources say.

The sources requested anonymity as the vote tally figures have not been publicly announced. Representatives for Digital World and TMTG did not immediately respond to requests for comment.

One of the options being considered by Digital World is to extend the voting deadline with the end goal of bolstering shareholder support, the sources said. Without further action, SPAC is expected to be liquidated on Thursday and return the money it raised in its September 2021 IPO.

If Digital World fails in its attempt to get its shareholders to support the one-year extension, its management has the right to extend its term without shareholder approval for up to six months. It is unclear whether Digital World will pursue this option and whether it would give regulators enough time to come to a conclusion on whether to allow the deal to continue.

Digital World revealed that the SEC, the Financial Industry Regulatory Authority and federal prosecutors are investigating the deal with TMTG, although the exact scope of the investigations is unclear.

Among the information sought by regulators are Digital World’s due diligence documents on potential targets other than TMTG, relationships between Digital World and other entities, meetings of Digital World’s board of directors, policies and procedures relating to trading and the identity of certain investors, Digital World said.


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

The PIPE is set to expire on September 20 unless the deal closes. Investment bankers at Digital World have been reaching out to investors in recent weeks to gauge their interest in expanding the PIPE, a person familiar with the matter said.

It’s unclear how TMTG fare without access to funding from Digital World. It raised $22.6 million through convertible promissory notes last year and another $15.4 million through bridge financing in the first quarter of this year. The agreement with Digital World caps the amount of debt TMTG can assume before the deal closes at $50 million.

Digital World said it believed TMTG would have “sufficient funds” through April 2023. TMTG said last week that Truth Social was “on solid financial footing” and would soon begin serving ads.

Trump started using Truth Social in April, two months after it launched on Apple Inc. (AAPL.O) app store. He currently has over 4 million followers – a fraction of the 89 million he had on Twitter Inc. (TWTR.N) before being banned for his role in the January 2021 US Capitol riots by thousands of his supporters.

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Reporting by Svea Herbst-Bayliss in Rhode Island; Additional reporting by Echo Wang and Krystal Hu in New York; Editing by Greg Roumeliotis and Edwina Gibbs

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