Digital World Acquisition (DWAC) , the so-called blank check company that is planning to merge with former President Donald Trump's fledgling media group, may need to scrap the multibillion deal if it can't get shareholder support for an extension, Reuters reported over the weekend.
Digital World Acquisition, a special purpose acquisition company, or SPAC, went public in September of last year with a much-hyped plan to merge with Trump Media & Technology Group and bring it onto the Nasdaq.
However, the deal with TMTG, which owns the Truth Social app favored by the former president, has been delayed by a series of investigations into its dealings with Digital World prior to the September 2021 IPO as well as questions linked to its underlying finances.
Reuters reported Monday that Digital World needs the support of 65% of its shareholders in order to extend the life of its SPAC status by 12 months in order to complete the deal, or liquidate its assets and listing by Thursday of this week.
A shareholder meeting, scheduled for today, was adjourned until Thursday September 8, the company said.
Digital World could extend the life of the SPAC by six months without shareholder approval, Reuters reported, but that may not buy it enough time to ride out the investigations currently underway by the Securities and Exchange Commission, the Financial Industry Regulatory Authority and federal prosecutors.
Digital World Acquisition shares were marked 15% lower in mid-day Tuesday trading to change hands at $21.40 each. The shares traded as high as $97.25 each in late March.
TMTG is set to receive around $1.3 billion from the merger agreement with Digital World, comprised of around $300 million in cash and a further $1 billion in so-called private investment in public equity, or PIPE funding, from its underlying shareholders.
The proposed merger between DWAC and Trump Media followed the former president's plans to return to social media through the launch of a new app dubbed 'Truth Social', which he called a "rival to the liberal media consortium and fight back against the "Big Tech” companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America."
Trump was banned from many of the major social media platforms -- including Twitter (TWTR) and Facebook (META) -- for his role in igniting the rioters that stormed the Capitol building on January 6 in a failed effort to overturn his election defeat to President Joe Biden.
After it launched, DWAC said Truth Social is forecast to have 81 million registered users by 2026, when average revenues per user will rise to $13.50.
