Digital World Acquisition offers to settle with SEC over Trump Media merger
The settlement, which is subject to SEC approval, could help unlock hundreds of millions of dollars that Trump’s company has been counting on for months. But the filing also hinted at tension between the companies that could undermine the deal entirely.
The merger deal, which was originally set to close last year, remains frozen due to the SEC investigation, and Digital World has been pushing to extend the deadline by another year beyond the September 8 deadline. In the filing, Digital World said that “according to its electronic record, [Trump Media] believes it is currently only bound under the merger agreement until and including 8 September 2023.”
Digital World “expects to work with [Trump Media] in good faith to address this disagreement in a manner that is in the best interest of shareholders, the filing states. “The company remains very interested in the transaction with [Trump Media] and is hopeful [the companies] can resolve this difference of interpretation.”
As of now, Digital World is set to liquidate on that date, returning $300 million to investors, if the merger deal has not gone through.
Digital World said it believed the settlement would “remove the cloud of uncertainty” hanging over the company and allow it to “move forward in achieving its goal” to help “create an alternative media platform.” Trump Media, it added, also retains the right to terminate the merger agreement outright.
The SEC did not respond to a request for comment Monday. Representatives for Digital World and Trump Media also did not respond.
Digital World had told the SEC in its initial public offering, in September 2021, that it “had not selected” nor had “any material discussions, directly or indirectly, with any business combination target,” in line with SEC rules that SPACs must not complete any merger prior to launch.
But in an indictment unsealed last week related to securities fraud charges, federal prosecutors showed text messages that suggested a former Digital World executive and other investors had known months ahead of the upcoming merger and tried to act on that information for a profit.
A former Trump Media executive, Will Wilkerson, also filed a whistleblower complaint last year with the SEC alleging that the merger discussions had violated securities laws. Trump Media fired him in October after he spoke to The Washington Post.
As part of the settlement, Digital World offered to amend its merger filing, known as a Form S-4, to ensure it was “materially complete and accurate” and to pay an $18 million penalty after the merger is approved.
Michael Ohlrogge, a law professor at New York University who studies SPACs, said the possible settlement seemed like a positive step for Digital World’s prospects, but that “even with this, getting regulatory approval for the merger is far from a done deal. “
He noted that Digital World still needs to resolve other “potentially difficult disclosure issues” to the SEC’s satisfaction, including the large discrepancy between the valuation the merger agreement had given Trump Media in October 2021 — up to $1.7 billion — and the value Trump had given Trump Media in his campaign finance filing in April (between $5 million and $25 million).
The company, Ohlrogge added, still faces questions about other loans and legal risks that could further delay the deal “or create a lot of liability for the company after the merger due to investors seeking to reclaim their money if they have credible allegations of being defrauded .”
