Lawsuits threaten to delay Trump Media merger
A wave of lawsuits threatens to delay shareholder votes on the long-delayed merger of former President Donald J. Trump’s social media company and a cash-rich shell company.
Two early founders of Trump Media & Technology Group have filed a lawsuit to maintain their ownership interest in the company, the parent company of online posting platform Truth Social. The lawsuit, filed under seal in Delaware Chancery Court on Wednesday by a partnership led by Wes Moss and Andy Litinsky, alleges that Trump Media is attempting to dilute its ownership stake in the company, of which Mr. Trump is a majority owner.
The lawsuit seeks an expedited hearing in Delaware state court ahead of the March 22 vote by Digital World Acquisition Corp. shareholders. about the merger with Trump Media. Digital World is the special purpose acquisition company created to raise money from investors in an initial public offering and use that money to find a private company like Trump Media to buy.
Mr. Moss and Mr. Litinsky were contestants on Mr. Trump’s real estate television show, “The Apprentice,” and went to him in January 2021 with the idea of starting a social media company.
Former Digital World CEO Patrick Orlando has also filed suit in Delaware to acquire additional shares in the company. And Digital World has filed its own lawsuit in Florida state court, arguing that Mr. Orlando, who was the sponsor of the IPO, was not entitled to more shares because of his “avarice, incompetence and general refusal to act.” in the company’s stock trading. best interest.
Digital World raised $300 million in an initial public offering in September 2021 and about a month later announced its planned merger with Trump Media, which needs the deal to operate Truth Social. Mr. Trump’s social media company has said in regulatory filings that it might not survive without new sources of funding.
In a filing with regulators on Friday, Digital World raised the prospect that Mr Orlando, who remains a board member, would reject the merger. Mr. Orlando’s group owns about 15 percent of Digital World’s shares; most of the remaining shares are owned by approximately 400,000 retail investors. Another filing raised the prospect of possible lawsuits that could delay the merger.
After the merger, Mr. Trump would own 79 million shares of Trump Media. Based on Digital World’s current price of $39 per share, Trump’s stake would be valued at $3 billion. The possible merger comes at a time when he needs to come up with the money to pay a $454 million fine following a New York judge’s ruling in a civil fraud case.
Merging with Digital World would give Trump Media not only an influx of cash to fund its operations, but also publicly traded stock that could be used to finance acquisitions. As chairman of Trump Media, the former president was given the lion’s share of the stock because of the value of his name to the company’s success. He would be the largest shareholder if the merger with the listed company is completed.
Shares of Digital World have soared as Trump moves closer to securing the Republican nomination for president and with the prospect of the deal closing later this month. The stock price has risen even though advertising on Truth Social has been mediocre.
Mr. Orlando’s firm, which sponsored Digital World, would become Trump Media’s second-largest shareholder.
Orlando’s lawsuit comes months after he resigned as CEO of Digital World and as a settlement with the Securities and Exchange Commission was being negotiated. Last summer, Digital World agreed to pay an $18 million fine to resolve allegations that it had improper merger discussions with Trump Media before its IPO. SPACs are not supposed to have a deal in prospect before their IPO
In the settlement agreement, Digital World’s CEO, who was not named but identified by his job title, was described by regulators as playing a significant role in the early deal discussions. In the lawsuit filed against Mr. Orlando, Digital World said that Mr. Orlando had received formal notice from the SEC that he may be subject to enforcement action.
Mr. Orlando has not been accused of any wrongdoing. He declined to comment and his attorney did not return a request for comment.