Trump’s Big Social Media Deal Could Soon Collapse. So What Went Wrong?

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The DWAC SPAC’s SEC attack won’t help it get back on track, experts say.

Patrick Orlando is trying to get Donald Trump’s attention. With a critical shareholder vote fast approaching, the CEO of the beleaguered Digital World Acquisition Corp.—a so-called SPAC that is supposed to merge with the former president’s social media company—needs all the help he can get. In recent weeks, Orlando has repeatedly tagged Trump on TruthSocial in an effort to salvage a deal that could be worth hundreds of millions of dollars. But he hasn’t gotten much of a response. 

Orlando and DWAC are teetering on the edge of a cliff. Under the rules of the SPAC’s formation, the company had just 12 months to merge with Trump Media & Technology Group; otherwise, DWAC is supposed to dissolve itself and return its money to shareholders. But the merger has been held up by an ongoing Securities and Exchange Commission investigation, and technically, the deadline has already passed. Orlando has staved off the immediate threat by unilaterally extending the deadline three months, but he needs 65 percent of shareholders in the company to approve a longer extension. Monday is the next, and possibly last, time to hold a shareholder’s meeting and get those votes—three previous attempts have fallen short.

Despite Orlando’s apparent pleas for Trump’s assistance, the former president hasn’t said much—or at least not much that’s helpful. In mid-September, Trump Media & Technology Group—the parent company of TruthSocial—issued a press release threatening a lawsuit against the SEC, but that isn’t viewed as a serious threat. At a rally in Michigan last weekend, Trump did rail against the SEC, accusing it of participating in a partisan conspiracy to thwart his efforts to take TMTG public. But he didn’t say what Orlando needed him to say about the upcoming DWAC vote. In fact, despite his anger at the SEC, Trump sounded like he was perfectly happy to walk away from the deal and seek alternate sources of funding for his nascent media empire.

“The company that wants to finance TruthSocial—you know about TruthSocial, it’s hot as a pistol, it’s hot as a pistol—but this is a finance company, it’s a SPAC, it’s being targeted by the SEC,” Trump told the crowd. “Now look, if they don’t come up with the financing, I’ll have it private. TruthSocial is hot, easy to have it private. You don’t have to go through all this.”

DWAC and many of its shareholders seem to agree with Trump that the deal has fallen prey to a deep-state plot. But many of the problems seem to be of the companies’ own making. TruthSocial has failed to impress and has struggled to amass users. DWAC can’t do anything about that right now—the two corporations haven’t merged yet. In filings with the SEC, moreover, DWAC has acknowledged that the future success of the combined business will be depend on Trump’s own popularity and ability to avoid scandals. Meanwhile, a series of bad choices made by Orlando’s own management team have arguably put the deal in further jeopardy.

Meanwhile, those who stand to get hurt the most are the Trump-supporting retail investors who snapped up DWAC shares last year as the meme stock exploded in value.

SPACs are blank-check companies that are allowed to go public with no purpose or business plan and, therefore, with little disclosure or scrutiny. Once public, the SPAC—short for “special purpose acquisition company”—tries to find a company that does have a real business idea that it can merge with. Ideally, it’s a company that would like to go public but isn’t interested in spending the time and money required to partner with a big Wall Street bank and doesn’t want to face intensive scrutiny from investors and regulators. The Trump Media & Technology Group is a perfect example of that kind of company. With Trump’s history of corporate bankruptcies and unpaid loans—and his increasingly toxic political brand—TMTG would have been a longshot for a traditional IPO sponsored by any of the typical Wall Street firms that shepherd companies through the process.

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