A complex deal to take Donald Trump’s social-media platform Truth Social public faces a crucial test next week that could determine whether it becomes a multibillion-dollar company that the former US president once vowed would stand up to “big tech” or instead languish in financial limbo.
Under the terms of the deal, announced in October 2021, Trump’s Trump Media & Technology Group was destined to merge with Digital World Acquisition Corp, a special-purpose acquisition company, or Spac.
But shareholders in Digital World are now being asked to give the company another year to complete the deal. If they refuse to do so at a meeting on 31 December, the enterprise may never become the $1.7bn company it once envisioned.
The path to tech riches the deal floated for Trump and his supporters has not been smooth.
Jay Ritter, a University of Florida finance professor, told the Washington Post this week that the merger has “been pretty much unprecedented in terms of all of the glitches”. The Post published a detailed exploration of the platform’s current position, prompting Shannon Devine, a spokeswoman for Trump Media, to accuse the paper of posting “a heaping pile of bias”.
Soon after it was announced Digital World’s plan to merge with Trump Media was hit with allegations that conversations between the two had taken place before they were permitted under Spac rules.
In March, Patrick Orlando was fired as CEO by Digital World’s board and a former board member was accused of insider trading.
Deadlines for closing the deal have already been extended five times. Digital World is facing warnings from the tech-heavy Nasdaq stock exchange that its shares could be delisted over a reporting issue.
In July, Digital World’s shares rallied 93% before a preliminary $18m settlement with the Securities and Exchange Commission over accounting fraud charges.
Last month, the company and Trump Media urged investors to vote for an extension to prevent DWAC’s dissolution.
“If you are a DWAC stockholder who believes in Truth Social’s mission to reopen the Internet and give people their voices back, we strongly urge you to vote TODAY,” the notice said, Bloomberg reported.
But Trump Media has blamed regulators for the deal’s delays. Last year, it accused the SEC of working to “sabotage” the merger, telling the Washington Post that agency had tossed “the matter into a bureaucratic black hole of inaction” and violated its own charter.
If shareholders fail to approve an extension, Digital World will be required to liquidate and return $300m it raised, leaving Trump’s Trump Media & Technology Group with nothing from the transaction.
When the deal was announced, US stock investors were still giddy with the prospects that Spac deals were an easier path to take companies public that traditional IPOs that place heavier burdens on financial disclosure.
Ardor for blank-check Spacs, however, rapidly cooled. At their peak in early 2021, hundreds existed. But regulators soon tightened conditions and investors fled and the number of completed deals plummeted.
But at one time investors in Digital World were hot for the Trump tie-up. Shares in Digital World soared to $175 when the merger was announced. On Friday, they stood at $16.51.
Trump himself envisioned a social media company that, he said, would “stand up to the tyranny of big tech”.
But there have been signs recently that even Trump maybe tiring of his own social-media play. There are estimated to be about 2 million users of Truth Social – tiny compared with Facebook’s 2.9 billion, YouTube’s 2.5 billion, WhatsApp’s 2 billion, Instagram’s 2 billion, and X, formerly Twitter, which counts about 541 million users.
When Truth Social was launched, Joshua Tucker, co-director of the NYU Center for Social Media and Politics, told the Guardian that part of the company’s problem was that it lacked “network effects” by excluding a large part of the political spectrum.
“They went after the Maga portion of the population, so they were starting with one hand tied behind their backs,” Tucker said. “It’s a tough sell, even before the problems of the launch and rollout.”
Trump chose to recently return to X to post his now-infamous Georgia elections prosecution booking mugshot. He insisted last week, however, that Truth Social was his still social media “home”, writing: “THERE IS NOTHING THAT COMES EVEN CLOSE!!!”
• This article was amended on 20 September 2023. An earlier version said that the deadline to vote to complete the merger was 8 September but this had been extended to 31 December.
