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Another failed merger vote leaves Trump’s Truth Social in limbo

Sept. 9, 2022 Updated Fri., Sept. 9, 2022 at 7:28 p.m.

The face of former president Donald Trump on the shirt of a supporter during a rally for candidates in Pennsylvania.  (Demetrius Freeman/Washington Post)
The face of former president Donald Trump on the shirt of a supporter during a rally for candidates in Pennsylvania. (Demetrius Freeman/Washington Post)
By Drew Harwell Washington Post

Former president Donald Trump has failed to win another vote – this time, from the shareholders of an investment ally his social network Truth Social had been counting on for cash.

Digital World Acquisition, a special-purpose acquisition company, said Thursday it had not yet gained enough shareholder votes to extend its deadline for merging with Trump’s start-up – a necessary step to unlock $1.3 billion in raised funds.

The company was scheduled for liquidation Thursday unless its investors approved the extension or the company’s sponsor paid to push back the deadline itself.

But Digital World’s chief, Patrick Orlando, said late Thursday that the company would instead postpone a long-awaited meeting until Oct. 10 without offering further detail, indicating the company was still scrambling to garner enough shareholder support.

The company has said in filings that Arc Capital, the Shanghai-based investment advisory firm that funds and sponsors Digital World, could pay $2.8 million to give the company another three months to seal the deal without shareholder approval.

Even that might not be enough time. Ongoing investigations from the Securities and Exchange Commission and federal prosecutors have frozen the merger indefinitely.

In an SEC filing Wednesday, Digital World reprinted an item from a pro-Trump blog urging the SEC to “wrap up its probe.”

Digital World’s charter allows its executives another three-month extension after this one, at a similar cost, to complete the deal.

If the merger is still not done by then, Digital World has said it could be forced to liquidate, returning all of its money to investors and leaving Trump’s operation with nothing.

The loss throws the main backer of Trump’s post-presidency business ventures once again into doubt.

Digital World has long been touted as Truth Social’s central funding source, and there’s no clear financial substitute if that money goes away.

Trump’s company said it is working to sell ads on Truth Social but has yet to report any revenue.

In May, Digital World said in an SEC filing that Trump’s company is running off loans, including $15 million in bridge financing from earlier this year, that could allow it to pay its bills through at least April 2023.

Trump has sought to downplay the issue, posting this weekend on Truth Social: “I don’t need financing, ‘I’m really rich!’ ”

But the company is already facing a dispute with a conservative online-services company over allegedly unpaid bills.

Digital World needed 65% of its shareholders to vote in support of giving the deal another year. But not enough voted, Orlando said.

Orlando and other investors had campaigned heavily in recent days to marshal enough shareholder support, including on Truth Social, a Twitter clone that has faced technical issues and low activity in the six months since its launch.

“We’re in the middle of this potentially historic vote, and I just want to make sure everybody’s ‘re-truthing,’ ‘quote-truthing,’ following each other and making sure that there’s no DWAC stockholders left behind,” Orlando said in a Truth Social video last week, using the platform’s words for “retweet” and “quote tweet.”

The meeting had originally been called for Tuesday but was postponed so the company could record more votes, Orlando said.

On Thursday, the meeting was postponed another two times before Orlando spoke at 5 p.m., saying the meeting would be postponed once again until Oct. 10.

Digital World’s share price increased about 1% on Thursday, to $23, and fell in after-hours trading following the postponement.

It is down nearly 90% from its peak of $175 shortly after its market debut.

Shortly before adjourning the meeting, Orlando wrote on Truth Social that “important information” would be disseminated on the site later Thursday.

Some on the site responded with concern at the move. “This is not good. They should have at least taken questions,” one user wrote.

Truth Social has become Trump’s main internet megaphone, though his audience there is roughly 95% smaller than the Twitter following he’d gained before losing the White House.

Trump was banned from all major social networks after his supporters stormed the U.S. Capitol due to his false allegations of election fraud on Jan. 6, 2021.

Truth Social has other things to worry about beyond its financial survival.

Google told Trump’s company last month that it would not let Truth Social go live on its Android app store until it could show it was effectively moderating posts on the site, including taking down physical threats and incitement to violence, a Google spokesperson told the Washington Post.

Both companies have said they’re working on the issue.

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