Digital World Acquisition Corp urges shareholders to delay merger with Trump Media

Digital World Acquisition Corp., the special purpose acquisition company planning to take former President Donald Trump’s media firm public, scheduled a shareholder meeting Tuesday as it seeks to extend the deadline for the merger for as much as a year.

Trump Media and Technology Group and the SPAC have faced increasing scrutiny in recent months. A federal probe was launched into possible securities violations over the deal. Fox Business reported that Truth Social was in financial trouble and had failed to pay a vendor over $1 million in contractually obligated payments, an allegation which the company denied.

DWAC itself warned shareholders that a decline in the ex-president’s popularity could hurt the deal. Indeed, the vote comes amid a Justice Department criminal probe into whether Trump illegally removed thousands of White House documents, including those marked “Top Secret” and “Classified,” to his Mar-a-Lago private home after he left the presidency.

Truth Social has faced its own scrutiny. The app was barred from the Google Play store for violating the store’s policies regarding the moderation of user-generated content. The platform remains accessible online and on the Apple App Store.

DWAC and Trump Media face a Thursday deadline to complete the merger, and the SPAC is eagerly seeking an extension.

DWAC needs 65% of shareholders to approve the delay. Patrick Orlando, DWAC’s CEO, has issued a barrage of pleas to shareholders through various channels, including Truth Social, urging them to approve the extension. Non-votes are essentially counted as “no” votes.

Some of the SPACs institutional investors, including Lighthouse Investment Partners and Pentwater Capital Management, didn’t comment on the upcoming vote when reached by CNBC. Citadel Investment Group said the company is holding stock as a “market maker,” not as a voting shareholder.

DWAC has warned previously that a “no” result could force DWAC into liquidation. The SPAC does, however, have built-in extensions of up to six months that can be initiated by sponsors adding money to the trust.

Orlando’s company, ARC Global Investments, holds 20% of these votes itself, he disclosed in an interview last Thursday with IPO Edge. Still, he said, “the retail shareholder holds a lot of weight.”

Trump Media and Technology Group and Truth Social were founded after Trump was banned from Twitter following the Jan. 6, 2021, Capitol riot. On that day, his supporters stormed the building in an attempt to prevent the certification of Joe Biden’s victory in the 2020 presidential election.

Trump Media announced in October 2021 that it would merge with DWAC to take the company public. Trump Media, headed by Republican former U.S. Rep. Devin Nunes, has said it also plans on launching TMTG News and TMTG+ video streaming services.

The high-profile nature of the merger has brought in more retail investors than SPACs normally attract. The SPACs institutional investors largely did not respond to a request for comment.

For investors, DWAC’s liquidation would pay out around $10 per share. Shares of the so-called blank check company have traded around $25 of late. This is far from its 2022 peak of about $97 in March. Weak turnout in the shareholder vote could squash the deal.

“Let’s #rocktheproxy,” the Florida-based Orlando said in one of his many Truth Social posts during the voting period. “Shooting for huge engagement and voter participation!!!!”

When questioned about probes into the DWAC-Trump Media deal, Orlando said that DWAC was “aware of many targets” prior to the offering, and that the company was complying with all probe requests.

“If there’s an inquiry, we respond to the inquiry. If there’s a procedure that we have to go through, we go through that procedure,” Orlando said in the IPO Edge interview.

The DWAC CEO also said Trump remained the chairman of Trump Media, countering reports that he left the board just weeks before the company was subpoenaed. Orlando reiterated the potential risks brought about by Trump’s volatile public popularity.

“There’s a risk factor. We need to let people know these are things you should think about,” Orlando told IPO Edge. “If certain events occur that are negative, they will negatively impact a stock.”

The results of the shareholder vote are expected to be announced Tuesday, barring a decision by the company to adjourn the meeting.

– CNBC’s Yun Li contributed to this report.