Shares of Digital World Acquisition, the SPAC trying to take Donald Trump’s media company public, fell 33% in premarket trading today amid a report that Digital World failed to secure enough votes for a deadline extension. The SPAC wants to push the outside date to September 2023 for completing the deal with Trump Media & Technology Group, which operates the Twitter-like Truth Social platform.
At stake is a $1.3 billion cash infusion that TMTG stands to receive.
Digital World adjourned its shareholder meeting after two minutes on Tuesday, CNBC reported, and the SPAC said it will continue counting votes on whether to delay a merger. Shares of DWAC were down another 16% this afternoon.
Reuters, citing people familiar with the matter, broke the news early this morning that the extension proposal failed to win enough votes. Digital World needs 65% of its shareholders to vote in favor of the proposal to extend its life by 12 months for the move to become effective. By Monday evening, Sept. 5, far fewer Digital World shareholders than those required had voted in favor, the sources said.
Most of Digital World’s shareholders are individual investors and getting them to vote through their brokers has been challenging, the SPAC’s CEO Patrick Orlando said last week.
One option being considered by Digital World is to postpone the vote deadline in a final bid to boost more shareholder support, the sources said. Without further action, the SPAC is set to liquidate on Thursday and return the money it raised in its September 2021 initial public offering.
Were Digital World to fail in its bid to get its shareholders to back the one-year extension, its management has the right to extend its life without shareholder approval by up to six months. It is unclear whether Digital World will pursue this option and if it would provide enough time for regulators to reach a conclusion on whether to allow the deal to proceed. If the SPAC were to enact the two three-month extensions allowable, DWAC’s sponsor would be required to invest over $6 million that it could not recover if the deal fails to close.
Digital World has disclosed that the SEC, the Financial Industry Regulatory Authority and federal prosecutors have been investigating the deal with TMTG, though the exact scope of the probes is unclear. One line of inquiry is whether the SPAC prior to its IPO held any discussions with TMTG about a deal.
A $1 billion PIPE is scheduled to expire on Sept. 20 unless the deal is completed. Investment bankers for Digital World have been reaching out to investors in the last few weeks to gauge their interest in extending the PIPE, Reuters reported, citing a person familiar with the matter.
An announcement on the voting results was initially expected later today, although after the abrupt adjournment of the shareholder meeting Reuters now reports the vote on extending the life of the SPAC by 12 months will be pushed back until Thursday, Sept. 8. Read more.
