Trump-linked SPAC passes 3-month extension as shareholder overtures fail

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Sep 8 (Reuters) – The blank check acquisition firm that agreed to merge with Donald Trump’s social media company said on Thursday it would extend its life by three months after its failed bid to obtain a 12-month extension from its shareholders.

At stake is a $1.3 billion cash injection that Trump Media & Technology Group (TMTG), which operates the former US president’s Truth Social app, is expected to receive from Digital World Acquisition Corp (DWAC.O ), the special purpose acquisition company (SPAC) that signed an agreement in October to take TMTG public.

The deal was frozen amid civil and criminal investigations into the circumstances surrounding the deal. Digital World had hoped that the US Securities and Exchange Commission (SEC), which is reviewing its disclosures about the deal, would now have given its blessing.

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Digital World had already pushed back the deadline for its shareholders to vote on the 12-month extension from Tuesday to Thursday. It needed 65% of its shareholders to vote in favor of the proposal, but that did not happen, Reuters reported on Monday. Read more

Most Digital World shareholders are individuals and getting them to vote through their brokers has been difficult, Digital World chief executive Patrick Orlando said last week.

As of Thursday, about 40% of Digital World shareholders had voted in favor of the 12-month extension, a person familiar with the matter said. Digital World said the voting deadline had now been pushed back to October 10 in a bid to entice more shareholders to vote.

Digital World was to be liquidated on Thursday and return the money raised in its September 2021 initial public offering to shareholders unless action is taken. However, SPAC said on Thursday that its executives loaned it $2.88 million as part of a deal to unilaterally extend its life until Dec. 8 and avoid liquidation.

TMTG on Thursday called on the SEC to set aside any “inappropriate policy considerations” and quickly conclude its review.

“The SEC has not commented meaningfully on the DWAC registration statement for a staggering 115+ days,” it said in a statement.

An SEC spokesperson did not respond to a request for comment.

Digital World revealed that the SEC, the Financial Industry Regulatory Authority and federal prosecutors are investigating the deal with TMTG, although the exact scope of the investigations is unclear.

Information sought by regulators includes Digital World documents on due diligence of potential targets other than TMTG, relationships between Digital World and other entities, meetings of Digital World’s board of directors, related policies and procedures to trading and the identity of certain investors, Digital World said.

HOSE AT RISK

If the deal goes through, TMTG would receive $293 million that Digital World has on hand, plus $1 billion committed by a group of investors in the form of a private equity investment (PIPE).

The PIPE is set to expire on September 20 unless the deal closes. Investment bankers at Digital World have been reaching out to investors in recent weeks to gauge their interest in expanding the PIPE, a person familiar with the matter said.

It’s unclear how TMTG is doing without access to funding from Digital World. It raised $22.6 million through convertible promissory notes last year and another $15.4 million through bridge financing in the first quarter. The agreement with Digital World caps the amount of debt TMTG can assume before the deal closes at $50 million.

Digital World said it believed TMTG would have “sufficient funds” through April 2023. TMTG said last week that Truth Social was “on solid financial footing” and would soon begin serving ads.

Trump started using Truth Social in April, two months after it launched on Apple Inc’s App Store (AAPL.O). He has more than 4 million followers – a fraction of the 89 million he had on Twitter Inc (TWTR.N) before he was banned for his role in the January 2021 US Capitol riots by thousands of his followers .

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Reporting by Svea Herbst-Bayliss; Additional reporting by Shivani Tanna in Bengaluru; Editing by Chizu Nomiyama, Chris Reese, Aurora Ellis and Richard Chang

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