Shareholders of Digital World Acquisition Corp (DWAC) , the special purpose acquisition company (SPAC) that plans to list Trump Media & Technology Group on the stock market through a merger, voted in favor of the deal on Friday. While the next step would be for the deal to be completed next week, its future is fraught with uncertainty. Digital World’s former CEO Patrick Orlando and former Trump business associates Andy Litinsky and Wes Moss have separately sued to ask for more shares for their previous work on the deal.
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It is unclear how and when these cases will be resolved. Even if the deal gets completed next week, Trump will not be allowed to sell any of his shares in the combined company for six months or borrow against them, based on terms he previously agreed.
The deal is also poised to deliver a vital $300 million cash infusion to Truth Social parent Trump Media & Technology Group (TMTG). The social media company lost $10.6 million from its operations in the first nine months of 2023 on revenue of $3.4 million. It has been funding itself by borrowing $40.7 million through convertible promissory notes that can be paid back in stock.
Based on how Digital World’s shares have recently traded, TMTG would be valued at as much as $5.7 billion following its merger with Digital World on an undiluted basis and as much as $8.6 billion on fully diluted basis that takes into account warrants to be exercised and earnout shares to be issued. In a rally fueled by Trump supporters and other retail investors, Digital World’s stock has nearly quadrupled since its tie-up with TMTG was announced in 2021.
Buying the stock “will help President Trump get his bond, buying 4 shares by all will benefit all,” Truth Social user @racinrob wrote in a post this week.
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Digital World’s shares tumbled over 10% on Friday following the deal’s shareholder approval. An $8.6 billion fully diluted valuation for the combined company would be a little less than half that of Elon Musk’s much more popular social media company X.
In February, Digital World said Truth Social has so far had 8.9 million sign-ups. X, by comparison, has more than half a billion monthly users, according to Musk.
Trump has 6.7 million followers on Truth Social, compared to the more than 88 million followers he had on X when the platform permanently suspended him, and the 87.4 million followers he currently has on that platform.
Deal hurdles
Trump, who is running to be U.S. president again, will own between 58.1% and 69.4% of the combined company, depending on the extent to which investors back the deal.
TMTG was launched with the help of Litinsky and Moss – two former contestants on Trump’s reality TV show “The Apprentice” – as a way for Trump to connect with his supporters after Facebook, Twitter and YouTube removed him following the Jan. 6, 2021 attack on the U.S. Capitol.
Since 2021, the deal has faced setbacks and delays. Digital World has been a target of investigations by the U.S. Department of Justice and the Securities and Exchange Commission (SEC), ousted Orlando as its chief executive, and shook up its board.
In July, Digital World reached an $18-million settlement with the SEC, which said Digital World misled investors by failing to disclose in filings that it had formulated a plan to acquire TMTG and was pursuing the acquisition before Digital World’s initial public offering.
In August, Trump posted on X his mug shot from his booking at Fulton County Jail in Georgia. He has not posted on X since, using Truth Social as his primary platform to reach voters.