If 65 percent of the company’s shareholders don’t agree to the extension through Thursday, the company could be forced into liquidation, a potentially devastating blow that would leave Truth Social with nothing.
The company can delay the merger by six months without shareholder approval, but its executives would have to invest millions to keep the company afloat. Some investment analysts doubt the extension would give the company enough time to address any outstanding concerns about the merger.
Digital World, a special purpose acquisition company or SPAC, attracted massive attention last year. But the state scrutiny, lackluster launch of Trump’s website, and other issues have dampened much of the market’s excitement.
Digital World’s share price fell more than 11 percent on Tuesday to close at $22.13 — almost 90 percent below its peak of $175 last October. If the company goes into liquidation, all shareholders — including those who bought in at very high prices — would get about $10 a share.
Truth Social faces financial peril as concerns mount over Trump’s future
In that case, Trump’s startup Trump Media & Technology Group, whose flagship product is Truth Social, will not be able to tap into an investment of around $1.3 billion that it has had since Digital World’s IPO last year set September.
The Trump start-up now lives on short-term loans in the tens of millions. The company is also facing a dispute with a conservative web hosting service over alleged unpaid bills.
The Securities and Exchange Commission and the Financial Industry Regulatory Authority are investigating Digital World, including over whether the company negotiated its deal with Trump before it went public, which could violate securities laws. A federal grand jury has also requested information from Trump’s company.
Without SEC approval, any deal will be halted indefinitely.
Digital World has long celebrated that many of its shareholders are small investors, known as retail investors, who bought the shares for financial or personal reasons and are not part of a larger investment.
But the potential vote failure highlights the risks of such funding, as ordinary shareholders may not follow financial announcements closely and may need to be persuaded to vote en masse.
The FBI attacker was a prolific contributor to Trump’s Truth Social website
“A lot of retail investors don’t pay much attention to that or don’t know what to do,” said Michael Ohlrogge, an associate law professor at New York University. “Or they might be like, ‘Hey, I’d rather have this merger sooner than later,’ not realizing that the only reason they’re asking for it is because there’s a good chance they won’t be able to complete the merger at all . ”
That investor apathy isn’t necessarily a death knell, Ohlrogge said, because the company can pay to extend the merger deadline and try again in six months. But it could also point to deeper questions about the company’s viability.
“The big question is: Why is it taking so long for them to close the deal?” he said. “It surprises me a little that they would have such a hard time” meeting the SEC’s requirements, he added, “unless they’re using one of these Trump-like legal strategies to come up with tooth and nail against any kind of… judicial authority to fight.”
Orlando has made efforts to make shareholders aware of the need for the company to vote. On his Truth Social account over the past week, he’s posted or reposted nearly 30 messages — or “truthfully” and “retruthfully” in site jargon — urging people to vote.
The company last week urged shareholders to open their email inboxes for voting details: “PLEASE DON’T FORGET TO CHECK YOUR SPAM FOLDER,” it said in an announcement filed with the SEC. Orlando picked one up too interviewposted on Rumble, a conservative video site that offers Truth Social Support services, detailing how investors should vote.
The call’s host, a Christian worship leader named Chad Nedohin, urged his fellow investors in the “DWAC family” to “catch up with those voices,” saying, “We consider ourselves the diamond hands of all diamond hands.” Video was viewed around 500 times.
Company leaders own about 18 percent of the shares and will vote in favor of the approval, it said said in an SEC filing, but they will need many more votes to reach the 65 percent threshold. said Orlando at the rumble Phone call that the participation rate of retail investors in polls like this is closer to about 25 percent.
Trump’s newest business partner: A Chinese company with a history of SEC investigations
Truth Social is at the heart of Trump Media & Technology Group, the start-up Trump debuted after losing the White House, which he boasted could become one of the biggest players in media, with giants like Disney and Facebook could compete.
Trump has tried to portray everything as going according to plan. He posted to Truth Social on Saturday that despite the federal investigation, the site was “doing really well,” saying, “Anyway, I don’t need funding, ‘I’m really rich!’ Private company anyone???” (The actual size of Trump’s fortune is disputed; the self-proclaimed “king of debt” has been linked to six corporate bankruptcies.)
On Tuesday, before the special meeting, Trump posted that the site was “performing amazingly” and that it had become “the most engaged social media platform on the web”! However, in every measure of online engagement — web traffic, downloads, follower counts — the site remains a tiny fraction of mainstream sites, and has even dropped since its launch six months ago. In the same post, Trump encouraged businesses to buy ads on the site.
in one expression Speaking to pro-Trump blog Just the News last week, Trump’s start-up Truth Social said “on a strong financial footing” and that “any claim to the contrary is knowingly false cash talk.”