Former President Trump created the Trump Media and Technology Group, which includes the Truth Social, after he was banned from Twitter.
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Stephanie Reynolds/AFP via Getty Images
Former President Trump created the Trump Media and Technology Group, which includes the Truth Social, after he was banned from Twitter.
Stephanie Reynolds/AFP via Getty Images
Former President Trump’s social media company faces another potentially big problem: It is struggling to complete a stock market listing that would allow it to raise more than the $1 billion it needs to keep operating.
Trump Media and Technology Group, which includes the Truth Social app it launched earlier this year, was planning to list on the Nasdaq through a complex process known as the SPAC merger.
But the deal is under legal and regulatory scrutiny, and the Securities and Exchange Commission has yet to indicate its approval.
On Thursday, it said SPAC, or the organization that will help list the shares, is called Digital World Acquisition Corp. And now you need to extend the listing. The company struggled to get the support of enough shareholders to move the deadline.
Here are more details about what’s going on.
why all that?
Instead of pursuing a traditional initial public offering, Trump Media and Technology Group decided to merge with a blank check company already listed on the Nasdaq.
These kinds of deals have It has become popular in recent years, when interest rates were close to zero. In effect, they give private companies a shortcut to a public offering – which requires less transparency than traditional IPOs.
The Trump Corporation (TMTG) and DWAC announced their merger last October, But it needs regulatory approval and shareholder approval.
Since then, the two companies have experienced several setbacks.
In June, a New York grand jury subpoenaed TMTG, and according to the DWAC, “Some current and former TMTG members have also received individual grand jury subpoenas.”
In addition, the DWAC and some members of its board of directors have been subpoenaed by the Securities and Exchange Commission, which investigates SPAC communications and due diligence.
“These subpoenas and substantive investigations by the Securities and Exchange Commission and the US Department of Justice … could materially delay, impede or prevent completion of the transaction,” SPAC said in a filing.
Facing a deadline to complete the deal, DWAC CEO Patrick Orlando asked the company’s shareholders — many of whom are individual investors — to agree to a one-year extension.
But the company was not able to secure sufficient support from investors, a special meeting originally scheduled for Tuesday was quickly postponed, and two subsequent attempts to convene led to similar swift postponements without announcing the vote count.
Orlando announced Thursday afternoon that the meeting would take place again at noon on October 10.
“We are working hard to record all the votes that are still coming from our shareholders, and we are postponing this meeting to provide additional time for shareholders – whether small, medium or large – to cast their votes,” he said.
If not enough shareholders agree to the extension, the deal’s sponsors say they will throw more money into the phantom company’s coffers, allowing them to extend the deadline by another three months. If the deal is not completed by then, sponsors can fund an additional three-month extension.
What led us here?
When former President Trump founded the Trump Media and Technology Group about a year ago, He confessed It would be difficult and expensive to create a new platform that could rival the likes of Facebook and Twitter.
“It should be very well funded,” he said.
Digital World Acquisition Corp has $293 million in cash, and the completion of the SPAC merger will provide the company with $1 billion in additional funding from private investors.
In the days following the announcement, investors signaled their support for the merger. Last October, DWAC’s stock price soared to $175 per share.
But almost a year passed, and neither the Securities and Exchange Commission granted the deal with its blessing, nor did DWAC shareholders.
DWAC’s stock fell sharply after both companies admitted they were under legal and regulatory scrutiny. Today, it is trading at around $23 a share.
The launch of the Truth Social app has been delayed, and it is still not available on Android.
what happened after that?
Trump Media and Technology Group, the parent company of Truth Social, has entered into a merger agreement with Digital World Acquisition Corp. last October.
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Chris Delmas/AFP via Getty Images
Trump Media and Technology Group, the parent company of Truth Social, has entered into a merger agreement with Digital World Acquisition Corp. last October.
Chris Delmas/AFP via Getty Images
SPAC mergers must be completed on a set schedule and at the moment it seems difficult for Trump’s social media project to complete the merger.
If the deal is not approved by the deadline, and there is no further extension, the DWAC will be dissolved, and President Trump’s media company will have to find a new way to raise the money.
In a recent post on the Truth Social, the former president appeared to downplay the difficulty of doing so.
“I don’t need funding,” he wrote. “A private company anyone???”
What about those pending legal issues?
“It shouldn’t theoretically have to be completely dissolved in order to complete this deal,” says Michael Allrough, assistant professor of law at New York University. “The SEC’s greatest interest is seeing that risks are fully and clearly disclosed to shareholders.”
DWAC urged the Securities and Exchange Commission to end its investigation, and in recent interviews, Orlando said the company is cooperating with regulators.
“We’re a little late,” he said. “It’s slower than expected, but we’re fighting every day, working every day to deliver the ball.”
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