Wall Street is quickly souring on the likelihood of former President Donald Trump’s new social media company going public.
Nearly a year ago, Trump Media & Technology Group, the company behind the conservative social media app Truth Social, agreed to sell its stock to the public through a deal with Digital World Acquisition Corp., a little-known SPAC, or special purpose acquisition company. At the time, Digital World had 11 months to complete the deal, but closing the transaction has proved to be trickier than anticipated.
Digital World Acquisition executives had been expected to announce after a shareholder meeting on Tuesday whether enough investors had voted to extend the timeline to complete the deal by a year. But the executives decided instead to adjourn the meeting until Thursday to give the SPAC’s investors more time to cast their votes on whether to grant the extension.
If an extension can't be reached by then, the SPAC may be forced to liquidate and return the nearly $300 million it raised in 2021 back to investors.
A SPAC is effectively a publicly traded skeleton company with no major operations of its own that sets out to acquire a private entity using cash raised from its initial public offering. The private company — in this case TMTG — then takes over the SPAC’s listing on a stock exchange, effectively making the deal an alternative route to publicly listing stock in the U.S.
A liquidation by Digital World Acquisition would cap what has already been a wild ride for both the SPAC and TMTG, which operates Trump’s Truth Social and is led by Devin Nunes, the California Republican who left Congress in January to become the company’s CEO.
Since the 2021 deal was struck, Digital World Acquisition has become subjected to meme-stock-like movements in the market thanks to the pack of retail investors who have bought shares to back the former president’s efforts to set up the right’s own version of Twitter. The deal has also come under questioning by various government agencies, including the Securities and Exchange Commission and the Financial Industry Regulatory Authority.
It would separately raise a swirl of new questions around what’s next for the former president’s venture, including who — if anyone — will fill the hole as TMTG and Truth Social’s backers.
Launched six months ago, Truth Social has largely failed to generate the type of excitement that conservatives hoped for when Trump’s team unveiled the app. The company has run into a host of other issues as well, including reported spats and standoffs with a vendor, the U.S. Patent and Trademark Office and Google. But there have been reasons for optimism, including a surge in downloads of the app in the weeks since the FBI’s search of Mar-a-Lago.
Trump is signaling that he's not worried, writing in a Sept. 3 post on Truth Social, “I don’t need financing, ‘I’m really rich!’ Private company anyone???”
“Truth Social is continuing to grow rapidly, driven by extraordinary user engagement and the recent launch of ads on the platform,” a spokesperson for TMTG said in a statement to POLITICO. “TMTG will continue cooperating with all stakeholders in connection with its planned merger, and hopes the SEC staff will expeditiously conclude its review free from political interference.”
Digital World Acquisition may still have more levers to pull to finalize the deal. Executives themselves could extend the SPAC’s duration by another six months on their own, according to Reuters, which reported earlier that votes in favor of the extension were far below the threshold needed.
Investors do not seem optimistic about the deal’s prospects. On Tuesday, shares in Digital World Acquisition plunged by as much as 21 percent. The stock did recover some of the losses but still ended the day down 11 percent.
A spokesperson for Digital World Acquisition did not respond to a request for comment.
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