Shareholders of a cash-rich shell company on Tuesday approved a measure giving the company an additional 12 months to complete its long-awaited merger with former President Donald J. Trump’s social media company.
The shareholder vote increases the likelihood that Trump Media & Technology Group will receive at least $300 million in much-needed cash to operate Truth Social — a right-leaning social media platform.
Truth Social has emerged as Mr. Trump’s main megaphone for attacking his political opponents, as well as the federal and state prosecutors who brought four indictments against him. Online advertising on the social media platform is also an important part of Mr. Trump’s efforts to raise money for his 2024 presidential campaign.
The shell company Digital World Acquisition Corporation raised $300 million in an initial public offering in September 2021. A little more than a month later, the company, which was set up as a special purpose acquisition company, or SPAC, announced a merger deal with Trump Media.
If Digital World shareholders had not approved the extension, the company would have had to return the money raised in the IPO to shareholders on Friday.
A SPAC raises money from investors in an IPO in hopes of finding a private company to acquire. Federal securities laws require special purpose acquisition companies (SPACs) to liquidate and return their money to shareholders if a deal cannot be completed in a specified period — often two years.
The merger was announced when Truth Social was still in the planning stages and Mr Trump was banned from posting on most social media platforms following the violent protests at the US Capitol on January 6, 2021.
The deal was delayed due to a regulatory investigation into allegations that Digital World misled investors about conversations it had with Trump Media ahead of its initial public offering in September, which securities laws prohibit. Federal prosecutors also launched an investigation into allegations of insider trading in Digital World stock before the October 2021 merger announcement.
In July, Digital World reached a settlement with the Securities and Exchange Commission that required it to review certain regulatory filings and pay an $18 million fine if the merger was completed. Federal prosecutors have charged three men, including a former Digital World director, with participating in a $22 million insider trading scheme.
In the run-up to the regulatory settlement, Digital World ousted its original CEO and main promoter, Patrick Orlando, and renewed its board of directors. However, Mr. Orlando remains a major contributor to the digital world.
Digital World lobbied hard to persuade shareholders – mostly retail investors – to approve the measure to give the company more time to complete the merger. It hired a consulting firm to encourage 65% of the company’s shareholders to vote in favor of the extension.
Trump Media also offered support to the vote, sending email alerts to Truth Social subscribers urging them to vote for the extension if they were also Digital World shareholders.
“Thank you for all the outstanding support,” Eric Swider, CEO of Digital World, said on Truth Social shortly after the result of the extension vote was announced. “I hope you understand my silence. We remain focused on the task at hand and watch every word we say.”
Chad Nedohin, a digital world investor who has been an outspoken supporter of the merger, credited the SPAC shareholders with getting the extension approved, calling them “really impressive activists.” Hosted by Mr. Ndohin A View the weekly video It’s called “DWAC’D” on Rumble, a conservative streaming media site that is a business partner of Trump Media.
The merger still faces obstacles.
In early August, Trump Media recommitted to completing the deal only after it received new terms that would strengthen Mr. Trump’s control over the combined company. The amended agreement with Trump Media expects the merger to close by the end of December. Mr. Trump’s company could also terminate the agreement earlier, if Digital World cannot meet an Oct. 9 deadline for amended regulatory filings.
If the deal goes through, Mr. Trump will be the largest shareholder in the newly combined company, owning up to 70 million shares, according to a regulatory filing.
Digital World shares jumped after the company announced the results of the vote, closing up 3.6 percent. With a market valuation of more than $600 million, post-merger Trump Media will be one of Mr. Trump’s most valuable holdings.