Deal partner for Trump's Truth Social delays shareholder vote amid liquidation risk
The "blank-check" acquisition company planning to merge with Donald Trump's social media company delayed a shareholder vote to approve a one-year deadline extension to complete the deal.
Digital World Acquisition Corp. (DWAC) on Tuesday said it would postpone announcing the vote results, which was previously scheduled to take place on September 6. On Monday, Reuters had reported that the company had failed to rally enough shareholder support to approve the one-year breather to merge with Trump Media & Technology Group (TMTG).
Digital World had originally been slated to announce vote results at noon Eastern time on Tuesday, but instead CEO Patrick Orlando announced he was adjourning the shareholder meeting until Thursday to provide more time for stockholders to vote.
$1.3 billion in the balance
At stake is $1.3 billion in funding that would go to Trump's media firm when the merger closes, as well as the future of Digital World. Without the extension to complete the deal, DWAC may be forced to liquidate if it can't complete the transaction by September 8, according to regulatory filings.
Shares of DWAC, which operates as a so-called special-purpose acquisition company, plunged 15% Tuesday in afternoon trading. Since the start of the year, the stock has shed almost 60% of its value.
Digital World and TMTG have faced headwinds including investigations about the merger by both the Securities and Exchange Commission and the Department of Justice. Those probes have delayed the merger, which in turn prompted DWAC to ask its shareholders for more time to consummate the deal.
"We are working diligently to record all votes that are coming in," Orlando said in announcing the postponement of the shareholder meeting.
Digital World didn't immediately reply to a request for comment.
The latest twist for Digital World is a far cry from its initial foray into Trump's social-media business, which runs the right-wing Truth Social app. In late 2021, investors cheered the announcement that DWAC would merge with Trump's company, pushing DWAC's stock up as much as 1,200% in one day on hopes that TMTG could score with its "non-woke" content.
In the days leading up to the vote, there have been signs that DWAC shareholders may not be participating in the vote at rates high enough for the measure to pass. Digital World needs 65% of its shareholders to vote in favor of the extension for the measure to become effective.
Turning out the vote
Typically, stockholders are sent ballots ahead of shareholder meetings, when they are asked to vote on issues such as new directors for the board or other measures. The vote result is then announced at the meeting.
Orlando appeared on a webcast called "DWAC'd Live" on August 30 to urge his shareholders to get out the vote. He noted that individual investors, who make up the bulk of Digital World shareholders, typically don't participate in such votes at the same rate as institutional shareholders.
"I believe we're majority-held by retail and it's incredibly important to have our shareholders get their votes in," Orlando said on the August 30 webcast. "[T]he decisions are made by the shareholders, and if you don't vote it's taken as a no vote, No,. 1, and No. 2, you don't get heard."