New crucial deadline for Trump's social network, in search of funding

Critical new deadline for Trump's social network, in which financing te

MISE À DAY

Donald Trump's social network, Truth Social, will experience a decisive day on Thursday, with the risk that the company which should bring him fresh money will be dissolved, for lack of the agreement of its shareholders on a calendar.  

Launched at the end of February, Truth Social presents itself as an alternative option to the major social networks and a platform for the former American president, with freedom of expression as a banner and limited content moderation.

Since October 2021, Truth Social's parent company, Trump Media and Technology Group (TMTG), has been seeking a merger with a listed company, Digital World Acquisition Corp (DWAC), which is to inject approximately $1.15 billion into TMTG.< /p>

DWAC is a SPAC, that is to say a listed vehicle whose sole purpose is to raise funds to then merge with an existing company.

But the operation has encountered a series of difficulties, which forced DWAC to ask its shareholders to extend the merger deadline, initially set for September 20.

Thursday, they will have to decide at an extraordinary general meeting, which aims to postpone the deadline to September 2023. The resolution must be approved by shareholders controlling at least 65% of the shares to be adopted.

If this fails, DWAC will have to be dissolved and reimburse the shareholders, thus depriving TMTG and Truth Social of a crucial cash inflow.

“The problem is that most stocks are privately owned, unlike most SPACs,” which are controlled by institutional investors, says Jay Ritter, a professor at the Warrington College of Business (Florida).

“Most of these small holders have a small number of shares and do not vote (…) which amounts to voting no”, he adds, insofar as DWAC must absolutely meet the 65% threshold.

The union between DWAC and TMTG could also be complicated by the fact that the entity is the subject of an investigation by the American markets regulator, the SEC, on the terms of the merger.

In late August, one of TMTG's founding executives, William Wilkerson, contacted the SEC's whistleblowers' office to report irregularities in the reconciliation between the two entities.

In addition, at the end of June, DWAC revealed that it was under investigation by US federal authorities, which were to s or submit their elements to a grand jury, in view of a possible criminal trial.

On Wednesday, DWAC stock was near its lowest level since the announcement of the marriage with TMTG, in October 2021.