The shell company seeking to merge with former President Donald J. Trump’s social media company announced late Wednesday It has postponed a crucial shareholder meeting scheduled for Thursday, at which it hopes to announce investor approval to give it more time to complete the long-awaited deal.
The company is now giving shareholders until Sept. 5 to approve the measure to give it more time to complete the deal with Trump Media and Technology Group. This was just three days before the shell company, Digital World Acquisition Corp. , to begin liquidating and returning the $300 million it raised from investors in an initial public offering in September 2021.
Digital World was created as a special purpose acquisition vehicle, or SPAC, that raises money by taking it public to fund a future merger — in this case, Trump Media. The merger was announced on October 21, 2021, and Digital World is now trying to get 65 percent of its roughly 400,000 shareholders — mostly retail investors — to agree to extend the deal.
The vote to delay the liquidation date comes after Digital World reached a settlement with the Securities and Exchange Commission on July 20 to resolve an investigation into the events leading up to the original merger announcement. Digital World’s settlement requires it to pay an $18 million fine once the merger is complete and to review some of its filings for compliance with federal securities laws.
A year ago, when Digital World faced a similar need to push back its liquidation date, it took several delays to get enough shareholders to agree to the move. But the company is in a time crunch this year, because it can’t delay a vote on the extension until after the Sept. 8 liquidation date.
SPACs are required by securities laws to return cash raised in a public offering to investors if they are unable to complete the merger in a specified period. So far, nearly 30 percent of the 947 special application centers that went public since the start of 2020 have been liquidated, according to research firm SPACInsider.
If completed, the Digital World merger would provide Trump Media, the parent company of Truth Social, with a much-needed cash infusion.
Earlier this month, Trump Media committed itself to completing the deal by the end of the year but only after it secured new terms that would solidify Mr. Trump’s control of a combined company.
Under a revised agreement, Digital World will issue a new class of shares that will give Mr. Trump a minimum of 55 percent of the voting power on all shareholder measures. According to regulatory filings, Mr. Trump will also own a majority of the company’s major common stock after the merger.
At its peak, Digital World stock was trading at around $97 a share, but the delay dampened much of the early investor euphoria. The company’s disclosure that the shareholder vote had been delayed prompted a sale of nearly 12 percent of Digital World shares on Thursday.
However, at $15 a share, the stock is trading significantly above its roughly $10 share liquidation value.
The Truth Social channel has emerged as a key voice for Mr. Trump for his criticism of his political opponents and the federal and state prosecutors who have brought four indictments against him.
But the social media platform’s growth slowed after it was officially launched last year. The Truth Social app has been downloaded two million times this year, according to data analytics firm Sensor Tower. In total, Truth Social has been downloaded six million times since its introduction.