The special purpose acquisition company (SPAC) taking Trump’s Truth Social media platform public hasn’t been paying their bills. A proxy firm hired by Digital World Acquisition Corp. to lobby shareholders to approve extending the deadline to complete the merger with Trump Media & Technology Group (TMTG) for a year – an effort that has so far failed – was stiffed by at least six figures. The revelation contradicts DWAC’s statements in early September that TMTG had “sufficient funds” until April of 2023. TMTG said that the social media platform was on “strong financial footing.”
A lot is at stake. Financial Times reported that if the deal falls through, investors would receive back from their investment around $10 a share in compensation, while “sponsors” would lose all of the money put up to get TMTG going.
DWAC’s failure to pay its proxy solicitors could raise questions about the finances of its backers, including founder Patrick Orlando, who stand to make hundreds of millions of dollars if the deal is completed.
Trump SPAC for Truth Social transaction fails to pay proxy firm despite tough hunt for votes
Solicitors charged with drumming up support for struggling deal are owed six-figure sum https://t.co/CmbcO7nPvf
— Spiro’s Ghost (@SpiroAgnewGhost) September 17, 2022
Saratoga Proxy Consulting had an uphill campaign in its attempt to secure the needed votes. With $1.3 billion at stake, it fell far short of the 65% shareholder support needed to extend the deal. Now, questions as to whether the deal will be finalized abound, and the financial stability of DWAC has been called into question.
Once the deal is completed, TMTG would receive $293 million that Digital World has on hand plus $1 billion committed from a group of investors in the form of private investment in public equity (PIPE).
“The 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, a person familiar with the matter said,” according to CNBC.
That Saratoga hasn’t been paid shouldn’t come as a total shock. At the end of August, Fox reported that Truth Social failed to pay internet infrastructure company RightForge, making just three payments – and racking up over $1.5 million in fees owed to the web hosting company.
LOL. “Truth Social has made just three payments and ceased making any payments since around March. RightForge claims that Truth Social owes it around $1.6 million and is threatening legal action to recoup the money, these people add.” https://t.co/ruI3SKSBrF
— Daniel W. Drezner (@dandrezner) August 26, 2022
By mid-August, Digital World Acquisition Corp. saw its stock dive 75% since its March high, according to The Washington Post. According to Securities and Exchange Commission filings, DWAC has “no guaranteed source of revenue and a questionable path to growth.”
With losses in the mid-seven figures in the first half of the year, DWAC warned toward the end of August that the business could be hurt “if the ex-President becomes less popular or there are further controversies that damage his credibility.”
With the investigation into Trump’s handling of top secret and classified government documents revealing the potential threat to national security both here in the U.S. as well as abroad, the ex-president’s credibility after the discovery of documents containing the nuclear capabilities of a still unidentified foreign nation has cratered even further.
Digital World is under SEC investigation, and Donald Trump is facing federal and state criminal and civil investigations. If this deal is going to close, the clock is ticking, or else law enforcement may kill the deal for them when Trump is finally indicted.
Original reporting by Ortenca Aliaj at Financial Times.
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