Investors yank $138 million from company planning merger with Trump's Truth Social
Investors have pulled almost $140 million in commitments to a "blank-check" company planning a merger with the parent company of Donald Trump's Truth Social forum, the latest stumbling block for the proposed deal.
Digital World Acquisition Corp., a so-called special-purpose acquisition company, said in a regulatory filing on Friday that unnamed investors have sent "termination notices" representing about $138.5 million of $1 billion in commitments to the merged entities.
Digital World didn't immediately return a request for comment. Reuters reported that one of the investors that had withdrawn its commitment to the merger is Sabby Management, which had pledged $100 million. Sabby Management also didn't immediately return a request for comment.
Shares of Digital World fell 17 cents, or 1%, to $16.33 in Monday morning trading. The stock has plunged 68% this year.
The merger between Digital World and Truth Social's parent company, Trump Media & Technology Group, has encountered numerous headwinds this year, including investigations by both the Securities and Exchange Commission and the Department of Justice. Digital World earlier this month asked its shareholders for more time to complete the merger because of delays caused by the probes.
The SEC probe in particular is a setback for the company because the agency needs to sign off on the Digital World-Trump Media merger for it to be completed. Trump has called the investigations politically motivated "witch hunts."
Delay allows investors to bail
Because of the investigations, Digital World has asked its shareholders to approve more time to consummate the deal, which had been slated to close September 6. But earlier this month, the company failed to muster enough shareholder votes to support a one-year extension to complete the deal. Digital World has since pushed back its shareholder meeting on the vote until October 10.
As first envisioned, the merger between Digital World and Trump Media & Technology Group would transfer $1.3 billion in funding to the former president's media company. About $300 million was expected to come from Digital World, while the remaining $1 billion was pledged by institutional investors through a so-called "private investment in public equity" investment, or PIPE.
As part of the agreement with PIPE investors, they may exit their securities purchase agreements if the deal was not closed on or before September 20, according to Friday's regulatory filing.
Digital World said it is also possible that the PIPE could be restructured or renegotiated "in view of the PIPE closing conditions, evolving market and regulatory conditions."