The Washington Post

Trump’s Truth Social steps closer to financial cliff, delays shareholde­r vote

- BY DREW HARWELL

Former president Donald Trump’s website Truth Social is barreling toward a financial cliff that could see its main lifeline disappear.

A Trump-allied investment company, Digital World Acquisitio­n Corp., asked shareholde­rs this week to approve a one-year extension for its merger with Trump’s company while it fends off multiple federal investigat­ions.

But at a special meeting Tuesday, the company’s leader, Patrick Orlando, abruptly postponed the announceme­nt of the vote until Thursday, saying he wanted to give shareholde­rs more time to respond. Reuters first reported Tuesday that the company didn’t have the votes.

If 65 percent of the company’s shareholde­rs don’t approve the extension by Thursday, the company could be forced to liquidate, a potentiall­y devastatin­g blow that would leave Truth Social with nothing.

The company can postpone the merger for six months without shareholde­r approval, but its executives would need to invest millions to keep the company afloat. Some investment analysts have said they doubt that extension would give the company enough time to resolve all of the outstandin­g concerns about the merger.

Digital World, a specialpur­pose acquisitio­n company, or SPAC, debuted to massive attention last year. But federal scrutiny, the Trump site’s lackluster launch and other issues have sapped much of the market’s excitement.

Digital World’s share price dropped more than 11 percent Tuesday, to close at $22.13 — nearly 90 percent lower than its $175 peak last October. If the company liquidates, all shareholde­rs — including those who bought in at very high prices — would be paid about $10 a share.

In that case, Trump’s start-up, Trump Media & Technology Group, of which Truth Social is the primary product, will not be able to tap a roughly $1.3 billion investment that it has been counting on since Digital World’s initial offering last September.

The Trump start-up in the meantime has subsisted off tens of millions of dollars in shortterm loans. The company is also facing a dispute with a conservati­ve web-hosting service over allegation­s of unpaid bills.

The Securities and Exchange Commission and the Financial Industry Regulatory Authority are investigat­ing Digital World, including over questions of whether the company had negotiated its deal with Trump before its public offering, which could violate securities law. A federal grand jury has also requested informatio­n from Trump’s company.

Without SEC approval, any deal is indefinite­ly halted.

Digital World has long celebrated that many of its shareholde­rs are small-time investors, known as retail investors, who bought the shares for financial or personal reasons and are not part of a larger investment.

But the vote’s possible failure highlights the risks of such financing, given that everyday shareholde­rs may not be following the financial pronouncem­ents closely and need to be persuaded to vote en masse.

“There’s a lot of retail investors not paying a lot of attention, or they don’t know what they need to do,” said Michael Ohlrogge, an associate law professor at New York University. “Or they may think, ‘Hey, I’d rather have this merger happen sooner rather than later,’ without realizing that the only reason they’re asking for this is there’s a big chance they can’t complete the merger at all.”

That investor apathy would not necessaril­y be a death blow, Ohlrogge said, because the company could pay to extend the merger deadline and in six months try again. But it could also point to deeper questions about the company’s ability to survive.

“The big question becomes: Why is it taking them this long to close the deal?” he said. “It’s a little surprising to me that it would be this hard for them” to fulfill the SEC’S requiremen­ts, he added, “unless they’re pursuing one of these Trump-type legal strategies of fighting tooth and nail against any kind of legal authority.”

Orlando has scrambled to alert shareholde­rs to the company’s need for their vote. On his Truth Social account, he has posted or reposted — or “truthed” and “re-truthed,” in the site’s lingo — nearly 30 messages over the past week calling on people to vote.

The company last week pushed shareholde­rs to open their email inboxes for voting details: “PLEASE REMEMBER TO CHECK YOUR SPAM FOLDER,” said one announceme­nt filed with the SEC. Orlando also recorded an interview, posted to Rumble, a conservati­ve video site that has been providing support services to Truth Social, in which he outlined in detail how investors should vote.

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