Digital World Acquisition, the SPAC that first initiated the Trump Media and Technology Group merger in 2021, said in an SEC filing late Wednesday that the SEC has signed a registration statement and announced that Digital World Acquisition World said it would announce a general meeting of shareholders within two days. Vote on the adoption of the merger. Digital World stock rose to about $50 Thursday morning.
The approval is a victory for Trump, who will own more than 78 million shares of the combined company, which would be worth nearly $4 billion at current prices. ing. Mr. Trump and other investors, who own between 58% and 69% of the company’s stock, could earn tens of millions of additional shares through an “earn-out” provision tied to stock price performance, according to the filing. It is said that there is.
Jay Ritter, a finance professor at the University of Florida, said the windfall was “paper wealth… with a particular emphasis on ‘paper’.” [Trump Media] You cannot currently sell your shares. ”
According to Digital, Trump Media’s major shareholders, including Trump and his management team, have agreed to a common financial agreement known as a “lockup” period in which they cannot sell their shares for six months after the merger unless Digital World abandons the deal. He said he agreed to the terms. World filing. If the merger were to take place in April, for example, President Trump would not be able to sell his stock until October, by which time the value of the stock could have changed significantly.
Ritter said the combined company’s valuation (about $9 billion based on Digital World’s current prices) is out of sync with Trump’s company’s financial performance. . Digital World said in a recent SEC filing that Trump Media generated $3.4 million in revenue and lost $49 million in the first nine months of 2023.
Trump Media is “a loss-making business with less than $5 million in annual revenue,” Ritter said. In his view, Digital World is “a classic meme stock whose price has nothing to do with underlying fundamentals.”
Trump Media CEO Devin Nunes, a former Republican congressman, said in a statement late Wednesday that the company will “accelerate efforts to build free speech highways outside of Big Tech’s stifling stranglehold.” He said he is aiming for Digital World CEO Eric Swider said, “This achievement marks an important milestone.”
However, the merger will expose the company to public market scrutiny and uncertainty, allowing investors to buy and sell shares based on the performance of Truth Social, the company’s only product. The site remains President Trump’s main online megaphone, but it has struggled to build a user base to compete with social media giants such as Facebook and X (formerly Twitter) that Trump initially said he would overtake.
Several Trump allies will be named to the combined company’s board of directors, including Trump’s eldest son, Donald Trump Jr., according to the filing. Robert E. Lighthizer, former trade representative to President Trump; Linda McMahon, former administrator of the Small Business Administration. and Kash Patel, a former Nunes aide who served on President Trump’s National Security Council.
Under the settlement announced last summer, Digital World will have to pay an $18 million penalty to the SEC to complete the merger to resolve accusations that it misled investors about its original merger plan and violated anti-fraud rules. need to pay money.
A federal indictment against three early Digital World investors who investigators say made tens of millions of dollars in insider trading related to the merger agreement is also scheduled for trial in April. In a superseding indictment filed last week in federal court, prosecutors added money laundering charges against one of the investors, Michael Schwartzman, for using some of the profits to sell money he later dubbed “Provocateur.” He said he purchased a $14 million luxury yacht, which he renamed. President Trump, Trump Media, and Digital World have not been accused of wrongdoing in this matter.
The deal is expected to easily gain shareholder approval, given the potential for stock price appreciation following the merger. Digital World said in a filing that it intends to apply to list the combined company’s stock on the Nasdaq exchange, using President Trump’s initials “DJT” as its symbol.
But the merger could face resistance from Trump Media co-founders Andy Litinsky and Wes Moss, whose investment firm United Atlantic Ventures recently threatened the merger. ing. Digital World said in a filing Monday that it will block or prevent the merger from completing. The company sent a letter to Digital World in recent weeks stating that its original agreement with President Trump starting in 2021 is still in effect, including the right to appoint two directors to its board and receive $1 million in reimbursement. claimed to have been granted. Said.
UAV representatives sent text messages to Trump Media shareholders saying the company may try to block the merger, and UAV also filed legal action against Trump Media last week, according to Digital World filings. He reportedly sent a threatening letter. Trump Media told Digital World that it does not agree with UAV’s claims and that it has issued a new agreement granting Trump Media’s new leaders “extensive intellectual property and digital media rights related to President Trump.” He supported the agreement and said it expired in 2021.
The two founded the company and pitched it to President Trump in early 2021, but were forced out amid infighting with Trump’s other business partners, former company executive Will Wilkerson said in a 2022 whistleblower complaint. He told the Washington Post and the SEC.
Patrick Orlando, who was fired as Digital World’s chief executive last year but remains on the board, also requested “additional compensation,” a request that Digital World denied, the SPAC said in a Monday filing. Stated. “As a result, the professional relationship is … strained, and there can be no assurance that Mr. Orlando will be … cooperative with respect to the merger agreement.”
Orlando played a pivotal role in the creation of Digital World, including linking it with Ark Global Investments, a sponsor of Ark Global Investments, a subsidiary of Shanghai-based investment firm Ark Capital. . The sponsor provides initial funding to launch his SPAC before going public. “Orlando may leverage its control over a significant portion of the sponsor and founder shares to make further demands,” the filing states.
If the merger is approved, United Atlantic Ventures will own about 6% of the company and Ark Global Investments will own about 9%, according to a filing with Digital World.
Michael Ohlrogge, an associate professor at New York University, believes that Trump’s potential after the merger could be even higher, given that companies and foreign governments could indirectly pay him by buying ads on Truth Social. said the company could raise conflict of interest concerns for Republican presidential candidates. Trump’s companies received more than $7 million in payments from foreign governments, including officials from China and Saudi Arabia, during his presidency, according to a House Oversight Committee report released by Democrats last month.