© Reuters. Social media logo Truth is seen behind a woman holding a smartphone in this illustration photo taken February 21, 2022. REUTERS / Dado Ruvic / Illustration
By Echo Wang and Helen Coster
(Reuters) – The blank check buyback company that agreed to merge with former US President Donald Trump’s social media company on Tuesday failed to secure enough shareholder support for the extension. one more year to close the deal.
At stake is the $1.3 billion in cash that Trump Media & Technology Group (TMTG), which runs the Truth Social app, will receive from Digital World Acquisition Corp, a special purpose acquisition company (SPAC). signed an agreement in October to make the TM public.
The transaction has stalled amid civil and criminal investigations into the circumstances surrounding the deal. The digital world had hoped that the US Securities and Exchange Commission (SEC), which is reviewing its disclosures about the deal, would bless it for now.
Digital World CEO Patrick Orlando told a special meeting of his shareholders on Tuesday that he will push back the deadline for a vote on extending the life of the SPAC by 12 months. at noon on Thursday.
The digital world needed 65% of its shareholders to vote in favor of the proposal, but support as of late Monday had dwindled, Reuters reported. Digital World did not disclose profits on Tuesday.
Shares of Digital World fell 17% to $20.74 in New York early Tuesday afternoon.
Digital World is expected to liquidate on Thursday and return funds raised in its September 2021 initial public offering to shareholders unless action is taken.
Digital World shareholders have more than two weeks to vote on extending the SPAC, and it’s unclear whether the two additional days will make a difference. Orlando said last week that most Digital World shareholders are individuals, and getting them to vote through their brokerages is a big challenge.
If Digital World does not receive sufficient shareholder support, its management reserves the right to unilaterally extend the operating life of the SPAC up to six months. It is unclear whether Digital World will pursue this option and whether it will give regulators enough time to conclude whether to allow the deal to proceed.
A TMTG representative did not respond to a request for comment.
Trump appeared to be managing expectations for the deal with a post over the weekend on Truth Social: “I don’t need financing, ‘I’m really rich!’ Who is the private company???”
Digital World has revealed that the SEC, the Financial Industry Regulatory Authority and federal prosecutors have been investigating the TMTG deal, although the exact scope of the investigations remains unclear.
Information sought by regulators includes Digital World documents on the appraisal of potential non-World Trade targets, the relationship between Digital World and other organizations, council meetings Governance of the Digital World, policies and procedures relating to transactions and the identity of certain investors.
PIPE AT RISK
If the transaction closes, TMTG will receive the $293 million Digital World has in hand, plus $1 billion in commitments from a group of investors in the form of a private equity investment (PIPE). ).
PIPE is expected to expire on September 20 unless the deal is finalized. Investment bankers for the Digital World have been reaching out to investors over the past few weeks to gauge their interest in expanding PIPE, a person familiar with the matter said.
It is not clear how TMTG would function without access to Digital World funding. It raised $22.6 million through convertible notes last year and another $15.4 million through bridge funding in the first quarter. The deal with Digital World limits the amount of debt TMTG can incur before the deal closes at $50 million.
Digital World said it believes TMTG will have “enough money” through April 2023. Last week TMTG said that Truth Social is “financially sound” and will start running ads soon.
Trump started using Truth Social in April, two months after it launched on Apple Inc’s app store (NASDAQ:). He has over 4 million followers – a fraction of the 89 million he has Twitter Inc (NYSE:) before he was banned for his role in the January 2021 US Congress riots by thousands of his supporters.