The financial outlook has been grim for some time for Digital World Acquisition Corporation, the publicly traded “blank check” shell company that is trying to merge with Donald Trump’s social media website, but it's only gotten worse after billionaire investor Elon Musk announced that he would move forward with his agreement to purchase Twitter.
Musk’s announcement created even more uncertainty for Digital World ahead of a Monday shareholder meeting that could lead to the breakup of the special purpose acquisition company (SPAC), which has seen numerous delays in its attempt to merge with the parent company of Trump’s Truth Social, a Twitter clone that has been plagued with technical problems and violent content.
Under the terms of its incorporation documents, Digital World was supposed to have found a firm to acquire -- and received 65% of shareholder votes for the transaction -- by Sept. 20 or liquidate all of its assets.
If approved, the deal would inject over $1.3 billion into the Trump Media and Technology Group, much-needed cash for the disgraced former president who has had difficulty getting traditional financial institutions to lend him money in light of his many failed business ventures and constant lying.
Digital World executives injected $2.9 million of their own money to postpone the termination until Dec. 8. During the Monday meeting, shareholders will be allowed to vote on whether to extend the lifetime of the company by up to one additional year.
SPACs became extremely popular in 2021 as a way for companies to circumvent disclosure regulations that govern traditional initial stock offerings, including those governing foreign investment.
Announced nearly a year ago, the Trump Media-Digital World merger has faced significant hurdles, including an investigation by the Securities and Exchange Commission (SEC) into whether Digital World executives had violated regulations that prevent SPACs from having contact with the firms they wish to acquire before their initial public offering.
In June, Digital World announced that, in addition to the SEC investigation, a grand jury convened by a federal district attorney's office in New York City is examining whether Trump had illegally coordinated with company founder Patrick Orlando before it went public. Prosecutors are also investigating insider trading allegations involving a former Digital World board member, Bruce Garelick.
The SEC investigation appears to be based in part on allegations made by William Wilkerson, a senior vice president at Trump Media and Technology Group, who filed a whistleblower complaint in August with the agency. In an interview with the Miami Herald, Wilkerson alleged that the ex-president and Orlando had deviated from a Feb. 2021 agreement to use a pre-existing SPAC, Benessere Capital Acquisition Corp, to purchase Trump's soon-to-be-launched social network. That transaction would have been legal since Benessere was already a publicly traded company. Instead, according to Wilkerson, Orlando and Trump decided to create a new SPAC, Digital World.
As of Sunday evening, Wilkerson’s account on Truth Social had been set to private, meaning that it is viewable only by accounts that he also follows.
While the SEC and grand jury investigations of Digital World have continued, Trump and the company’s larger investors have grown increasingly nervous. The ex-president blasted the agency in a public statement last month with a typical, unfounded charge of “political bias.”
Some of Digital World’s initial investors have begun pulling out their funds, including Sabby Management, a secretive hedge fund known for buying stocks believed to be overvalued and selling them off as their value declines. The investment firm confirmed to Politico that it had withdrawn its $100 million stake in Digital World.
Sabby Management is one of several companies that were invited to a special round of investment in Digital World, which gave them significantly lower purchase prices at a time that the stock was trading at more than $90 per share.
Beyond the potentially fatal SEC investigation, Trump Media and Technology Group has had other setbacks, including allegations from its web hosting provider that the Truth Social network owed more than $1.6 million in unpaid service fees. The U.S. Patent and Trademark Office rejected Truth Social’s trademark application in August and the site has seen lower audience numbers since its initial launch in February.
As the difficulties continue to mount, Trump speculated that he might opt out of merging his little-used Twitter clone with Digital World.
“If they don’t come up with the financing, I'll have it private,” Trump told supporters at an Oct. 1 Michigan campaign rally.
Trump’s flailing user content site is one of several Twitter clones that have sprung up as far-right Republicans, including the ex-president, have complained that their efforts to promote disinformation and violent rhetoric have not been permitted by mainstream social media platforms such as TikTok, Facebook, and Twitter.
Musk’s announcement that he will move ahead with acquiring Twitter has created uncertainty for its MAGA imitators since the Tesla CEO has said repeatedly that he favors much more permissive content moderation and likely would reverse Twitter’s lifetime ban of Trump, which it instituted after he incited a violent mob of his supporters to attack the U.S. Congress.
Likely aware that a troll-friendly Twitter would mean fewer visitors to Truth Social, the ex-president said in April that he would not return to Twitter, even if his account were reinstated.
Trump attacked Musk in a July campaign rally in Alaska, calling Musk a “bullshit artist” who had agreed to a “rotten contract” to purchase Twitter. Musk retaliated by saying he believed Trump should retire from public life and was too old to be president.
In an interview with the Financial Times published Friday, Musk called Truth Social a “right-wing echo chamber” that “might as well be called Trumpet.” Trump has yet to remark upon Musk’s renewed interest in purchasing Twitter.
Trump has been unresponsive to Orlando’s repeated efforts on Truth Social to get the former president to encourage his followers who own Digital World stock to vote to extend the company’s life. Ahead of the Monday meeting, Orlando has even resorted to appearing on a QAnon show to reach his shareholders.
Shares for Digital World were selling for $17.06 in after-hours trading on Friday, down from the $22.13 they sold for on Sept. 7, and far-removed from their year-to-date high of $97.54.
TYT National Correspondent Matthew Sheffield reports about politics, media, and technology. Follow him on Twitter: @mattsheffield.