The cash-rich shell company's shareholders on Tuesday approved a measure that gives the firm an additional 12 months to replace former chairman Donald J. to complete a long-delayed merger with Trump's social media company.
The shareholder vote makes it more likely that Trump Media & Technology Group will get access to at least $300 million in much-needed cash to power Truth Social, a right-leaning social media platform.
Truth Social has emerged as Mr. Trump's main megaphone against his political opponents, as well as federal and state prosecutors who have filed four indictments against him. Online ads on the social media platform are also an important part of Mr. Trump's fundraising efforts for his 2024 presidential campaign.
Shell company Digital World Acquisition Corp. has raised $300 million in a September 2021 initial public offering. A month later, the company, which was formed as a special purpose acquisition company, or SPAC, announced a deal to merge with Trump Media.
If Digital World's shareholders do not approve the extension, the company would have to return the proceeds from its IPO to shareholders on Friday.
A SPAC raises money from investors in hopes of taking the company private in an IPO. Federal securities laws require SPACs to liquidate and return cash to shareholders if the deal can't be completed within a specified period of time — often two years.
The merger was announced while Truth Social was still in the planning stages and Mr Trump was banned from posting on most social media platforms following violent protests at the US Capitol on January 6, 2021.
The deal has been delayed by a regulatory investigation into allegations that Digital World misled investors about negotiations with the Trump media ahead of the September IPO, which is prohibited under securities laws. Federal prosecutors have also opened an investigation into allegations of insider trading in Digital World's stock before the October 2021 merger announcement.
In July, Digital World reached a settlement with the Securities and Exchange Commission that required it to revise regulatory filings and pay an $18 million fine if the merger goes through. Federal prosecutors have charged three men, including a former Digital World CEO, with their involvement in a $22 million insider trading scheme.
Ahead of the regulatory agreement, Digital World ousted its original chief executive and lead promoter, Patrick Orlando, and reshuffled its board. However, Mr. Orlando remains a major shareholder in Digital World.
Digital World lobbied hard to get shareholders — most of whom are retail investors — to approve the measure to give the company more time to complete the merger. He hired a consulting firm to encourage 65 percent of the company's shareholders to vote for the expansion.
Trump Media also supported the vote, sending email messages to Truth Social subscribers urging them to vote for the expansion if they were also Digital World shareholders.
“Thank you for your outstanding support. Please understand my silence. We remain focused on the task at hand and watch every word we say,” Eric Swider, CEO of Digital World, told Truth Social shortly after the extension vote was announced.
The merger still faces obstacles.
In early August, Trump Media recommitted to completing the deal only after accepting new terms that would strengthen Mr. Trump's control over the combined company. The revised agreement with Trump Media calls for the merger to close by the end of December. Mr. Trump's company could also terminate the deal early if Digital World fails to meet an Oct. 9 deadline to file amended regulatory filings.
If the deal goes through, Mr. Trump will be the largest shareholder in the newly combined company.
Shares in Digital World rose after the company announced the results of the vote. With a market value of more than $600 million, Trump Media will be one of Mr. Trump's most valuable holdings after the merger.