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After a literal volley of nail-biting drama, à la soap opera, the shareholders of the Special Purpose Acquisition Company (SPAC), Digital World, have finally accorded their approval to the much-delayed reverse merger with the Trump Media and Technology Group (TMTG), the parent entity of Truth Social, paving the way for the shares of the combined company to start trading on the Nasdaq exchange.
We noted in a post back in February that Digital World was slated to hold a meeting of its shareholders at 10:00 a.m. on the 22nd of March, 2024, to consider the proposal of merging with Trump Media and Technology Group.
Well, that meeting concluded just minutes ago, and the requisite approval to effect a merger with TMTG has now been secured. Accordingly, the shares of the combined company are now expected to start trading on the Nasdaq exchange next week under the symbol DJT. The combined company will now be called Trump Media and Technology Group Corp. Readers can access a Rumble live stream of the shareholder vote here.
Bear in mind that the SPAC's largest investor, Patrick Orlando's Arc Global Investments, had remained non-committal until the last minute in casting its vote in favor of the merger due to a dispute over the post-merger share issuance calculation (more details toward the end).
Note that former US President Trump will own 78.75 million shares - currently worth around $3.5 billion - in the combined company, making him one of the biggest beneficiaries. Of course, Trump's shares are subject to a six-month lock-up period. This means that he would not be able to post a $454 million civil fraud penalty by selling his shares in this new venture.
Today's merger is expected to unlock around $293 million in proceeds that Digital World raised in its IPO. This is expected to alleviate the serious cash constraints that Truth Social - an X-like platform that currently serves as Trump's echo chamber of sorts - has been facing for quite a while now. As of September 2023, Truth Social had just $1.8 million in cash against total liabilities of $60.5 million.
In preparation for its impending merger, Digital World has been setting its financial house in order in recent days. The SPAC issued promissory notes worth $50 million in February to bolster its liquidity. Digital World also announced $6.38 million in cumulative cash bonuses to attract and retain "employees and other personnel associated with TMTG," while also offering 40 million additional earnout shares.
The Merger Between Digital World and Trump Media and Technology Group was Complicated by a Spate of Last-Minute Lawsuits
We reported a few days back that the planned merger between Digital World and Trump Media and Technology Group was under threat from a number of lawsuits, including one where the co-founders of Trump's media-focused entity alleged that the former US President deliberately maneuvered to deprive them of a significant stake in TMTG that could have been worth hundreds of millions of dollars. Specifically, Andy Litinsky and Wes Moss claimed that their original 8.6 percent stake in TMTG was now subject to significant dilution via an “11th hour, pre-merger corporate maneuvering” that has increased the amount of authorized stock from 120 million shares to 1 billion shares. Trump's attorneys, on the other hand, claim that the duo's original services agreement with TMTG has already been voided, negating their locus standi.
Additionally, Digital World's former CEO, Patrick Orlando, and its sponsor Arc Global Investments II claimed in a lawsuit that the SPAC's current CEO, Eric Swider, and three other board members had miscalculated Arc’s stake in a manner that would deprive it over 2 million shares. For its part, Digital World alleged in a counter-suit that Orlando had threatened to block the proposed merger between DWAC and TMTG to “obtain a windfall by way of extortion.”
The Delaware Court of Chancery eventually denied Arc Global's motion for an injunction against the planned meeting of Digital World's shareholders on the 22nd of March. DWAC's proposal to keep the disputed shares under escrow was apparently sufficient to satisfy the court.
