Trump's Truth Social Deal Is Reportedly Falling Apart

A merger was supposed to take the social media company public, but amid multiple investigations, shareholders don't seem to support an extension.

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As Trump looms in the back of this image, even more troubles are looming on the horizon for Truth Social.
As Trump looms in the back of this image, even more troubles are looming on the horizon for Truth Social.
Image: Rokas Tenys (Shutterstock)

A merger that would’ve made Donald Trump’s social media venture into a publicly traded company, and provided Truth Social with $1.3 billion in cash investment is crumbling, according to a report from Reuters. Shareholders have rejected a one-year extension to finalize the acquisition, “people familiar with the matter” told the outlet.

The pending (and now possibly dead) deal is between Trump Media & Technology Group (TMTG), which owns Truth, and Digital World Acquisition Corp (DWAC), a special purpose acquisition company.

Since it was first announced in October 2021, the merger has been tumultuous. DWAC and the acquisition is the subject of multiple ongoing federal investigations, including probes from the SEC, Department of Justice, and a federal grand jury in the Southern District of New York.

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Details of the investigations are murky, but largely seem to concern the timing of merger discussions relative to when the deal was announced, and when Digital Worlds went public. Federal regulations bar special acquisition agreements from being discussed prior to a company’s initial public offering.

Note: these investigations are separate from all of the other, ongoing investigations into Trump himself, who founded TMTG, but may have been removed from the company’s board in July.

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Like all special purpose acquisition groups, or “blank check” businesses, DWAC was created as a shell company with the sole purpose of funding TMTG and bringing it to the stock market, while skirting around pesky regulatory hurdles like transparent reporting. DWAC is already publicly traded, and by absorbing TMTG, Truth Social would become the primary asset of the acquisition company.

But amid the ongoing legal troubles, DWAC filed a proposal to extend the final deal deadline by one year, to September 2023, last month. To approve that proposed extension, 65% of all company shareholders needed to offer their affirmative support by today, when the results are set to be officially announced in a special meeting. Yet, according to Reuters, “far fewer Digital World shareholders than those required had voted in favor,” the outlet’s unnamed sources said.

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Without the necessary shareholder support, and without further intervention, DWAC is set to liquidate on Thursday. That means the shell company will have to return the money it raised from investors, back to those investors and that Truth Social could be facing even more financial challenges.

From a DWAC SEC filing:

Without the Extension, the Board believes that there is significant risk that we might not, despite our best efforts, be able to complete the Business Combination on or before the Termination Date. If that were to occur, we would be precluded from completing the Business Combination and would be forced to liquidate even if our stockholders are otherwise in favor of consummating the Business Combination.

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However, Reuters also reported that Digital World’s executives are considering other options besides liquidation. The company could postpone the final vote deadline to try to drum up more support for the extension. DWAC management could also issue a six-month extension without shareholder support.

Either avenue though, might not be enough to keep DWAC afloat, and prop up Truth. The platform has gotten a recent boost in users, but still seems to be on financially tenuous ground, though TMTG has claimed otherwise. From Reuters:

It is unclear how TMTG is getting by without having access to Digital World’s funding. It raised $22.6 million through convertible promissory notes last year and an additional $15.4 million through bridge financing in the first quarter of this year. The agreement with Digital World caps the indebtedness that TMTG can assume prior to the deal closing at $50 million.

Digital World has said it believes TMTG will have “sufficient funds” until April 2023. TMTG said last week that Truth Social is “on strong financial footing” and would begin running advertisements soon.

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If Digital World folds, Truth and TMTG could ultimately follow. Which in many ways would obviously be good for helping to staunch the unending flow of conspiracies and lies that is most of the far-right internet. The downside is, without Trump’s personal platform, where will he go to post self-indicting statements about possible espionage?