Digital World Acquisition DWAC, the blank check company attempting to merge with former President Donald Trump's struggling media group Truth Social, is facing another hurdle in its attempts to complete the deal.
Trump was banned from Twitter and other social media sites after his failed attempt to subvert the peaceful transfer of power in the fatal Jan. 6, 2021 attack on the Capitol.
Musk has indicated he would allow Trump to return to Twitter if he completes his acquisition of the micro-blogging platform. That in turn could reduce Trump's interest in seeing the Digital World acquisition go through.
Digital World's shares have fallen by 69.21% during the past six months as it has faced struggles completing its merger. The shares traded as high as $97.25 in late March. They lost more ground after Musk's plans to go through with the Twitter acquisition came to light.
Digital World Has Struggled
Digital World Acquisition did not find enough shareholder support on Sept. 8 for a one-year extension on its merger plans. The company chose to arrange a three-month extension that lasts until Dec. 10.
A vote deadline on the full one-year extension was postponed until October 10.
If Digital World Acquisition fails to complete its planned acquisition, it would be forced to liquidate and return the company's cash to shareholders.
Digital World Acquisition, a special purpose acquisition company or SPAC, went public a year ago. Its plan to acquire Trump's media platform was met with a lot of hype and enthusiasm from Trump's fan base.
A series of investigations have delayed the deal with TMTG, due to its dealings with Digital World prior to the September 2021 IPO. There have also been questions linked to its underlying finances.
"The SEC has needlessly delayed its review of our proposed merger, causing real and unnecessary financial harm to DWAC investors, roughly 90% of whom are small, retail shareholders whom the SEC is chartered to protect," TMTG said in a statement. "In the interests of simple fairness, the SEC needs to set aside any improper political considerations and bring its review to a swift conclusion.”
TMTG would receive around $1.3 billion from the merger agreement with Digital World, which includes around $300 million in cash and another $1 billion in so-called private investment in public equity or PIPE funding, from its underlying shareholders.
The merger announcement between DWAC and Trump Media followed the former president's plans to come back to social media through the launch of an app dubbed 'Truth Social.' Trump had called the app a "rival to the liberal media consortium and fight back against the "Big Tech” companies of Silicon Valley, which have used their unilateral power to silence opposing voices in America."
Trump was banned from the three main social media sites, including Twitter, Facebook (META) and YouTube (GOOGL) in the aftermath of the Jan. 6, 2021 attack on the Capitol as Senators met to confirm Joe Biden's victory in the 2020 presidential election.
While Truth Social drew many downloads initially when it was launched, the interest appears to have declined, and even Trump has been intermittent in posting on it.
Trump Sues Media Again
On Oct. 3, Trump also sued CNN on allegations of defamation and is seeking $475 million in damages.
The former president has been litigious against his critics in the media in suits that generally fail legally, but serve to distract or excite his supporters into making donations.
His campaign sued the New York Times and the Washington Post in 2020 for libel because of opinion pieces that connected the campaign to electoral interference by Russia.
The lawsuit against the New York Times was later dismissed. The lawsuit against the Washington Post is pending.
In 2020, his campaign filed a libel suit against CNN because of an op-ed piece, but that case was also dismissed later.
Trump is facing several legal cases and investigations as well, including one by the Department of Justice into his removal of top secret documents from the White House when he left Washington. He also faces tax fraud charges in New York and is facing a grand jury probe of his attempts to interfere in Georgia's 2020 election.