Truth Social in limbo as merger partner grapples with another failed vote

Truth Social in limbo as merger partner grapples with another failed vote

Former President Donald Trump failed to win another vote – this time, from shareholders of a financial ally his social network Truth Social had relied on for cash.

Digital World Acquisition Corp., a special-purpose acquisition company, said on Thursday it had not yet secured enough shareholder votes to extend its deadline for merging with the Trump startup — a necessary step to unlock $1.3 billion in funds raised.

The company was due to go into liquidation on Thursday unless its investors approve the extension or the company’s sponsor pays itself to extend the deadline.

But Digital World chief Patrick Orlando said on Thursday evening that the company would instead postpone a long-awaited meeting until October 10 without giving further details, indicating that the company was still struggling to get enough support from shareholders. .

The company said in filings that Arc Capital, the Shanghai-based investment advisory firm that funds and sponsors Digital World, could pay $2.8 million to give the company another three months to complete the deal. without shareholder approval.

Even that may not be enough time. Ongoing investigations by the Securities and Exchange Commission and federal prosecutors have frozen the merger indefinitely. In an SEC filing on Wednesday, Digital World reprinted an article from a pro-Trump blog post urging the SEC to “conclude its investigation.”

Digital World’s charter allows its executives another three-month extension after this one, at a similar cost, to close the deal. If the merger still isn’t complete by then, Digital World said it could be forced to liquidate, returning all of its money to investors and leaving Trump’s operation with nothing.

The loss once again casts doubt on the top backer of Trump’s post-presidency business ventures. Digital World has long been touted as Truth Social’s central funding source, and there’s no clear financial substitute if that money disappears.

Trump’s company said it was working to sell ads on Truth Social, but hadn’t reported any revenue yet. In May, Digital World said in an SEC filing that Trump’s company was repaying loans, including $15 million in bridge financing from earlier this year, that could see it pay its bills until in April 2023 at least.

Trump has sought to downplay the issue, posting on Truth Social over the weekend, “I don’t need the funding, ‘I’m really rich!’ But the company is already facing a dispute with a conservative online services company over allegedly unpaid bills.

Trump’s Truth Social is nearing a financial cliff

Digital World needed 65% of its shareholders to vote to give the deal an extra year. But not enough voted, Orlando said.

Orlando and other investors had been campaigning in recent days to muster enough shareholder support, including on Truth Social, a Twitter clone that has experienced technical issues and low activity in the more than six months since its launch. .

“We’re in the middle of this potentially historic vote, and I just want to make sure everyone ‘re-truth’, ‘quote-truth’, follows each other and makes sure no DWAC shareholders are left” , Orlando said. in a Truth Social video last week, using the platform’s words for “retweet” and “quote tweet.”

The meeting was originally called for Tuesday but was postponed so the company could register more votes, Orlando said. On Thursday, the meeting was postponed twice more before Orlando took the floor at 5 p.m., indicating that the meeting would be postponed again to October 10.

Digital World’s stock price rose about 1% on Thursday, to $23, and fell after hours after the postponement. It is down nearly 90% from its high of $175 shortly after its market debut.

Shortly before adjourning the meeting, Orlando wrote on Truth Social that “important information” would be posted on the site later Thursday. Some on the site responded with concern to the move. “This is not right. They should have at least answered the questions,” one user wrote.

Trump’s disastrous launch of Truth Social raises doubts about its long-term viability

Truth Social has become Trump’s main internet megaphone, although its audience is about 95% lower than Twitter’s after winning before losing the White House.

Trump has been banned from all major social media after his supporters stormed the US Capitol over his false allegations of voter fraud on January 6, 2021.

Truth Social has other worries beyond financial survival. Google told Trump’s company last month that it wouldn’t let Truth Social go live on its Android app store until it could show it was effectively moderating posts on the site, including removing physical threats and incitement to violence, a Google spokesperson told The Washington Post. . Both companies said they were working on the issue.

Google sent its notice to the company about a week after a gunman tried to break into an FBI field office in Cincinnati, an agency Trump has regularly vilified. Ricky Shiffer, the suspect who police say was killed in a shootout, had been a prolific user of Truth Social, urging subscribers to “kill”. [FBI agents] on sight.”

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