Digital World again fails to get enough votes to extend the Truth Social merger

Former President Donald Trump has failed to win another vote – this time from the shareholders of an investment ally his social network Truth Social had been counting on for cash.

Digital World Acquisition Corp., a special-purpose buyout company, said Thursday it had not yet received enough shareholder votes to extend the deadline to merge with Trump̵[ads1]7;s startup — a necessary step to unlock $1.3 billion in raised funds.

The company was scheduled to be liquidated on Thursday unless the investors approved the extension or the company’s sponsor paid to push the deadline itself.

But Digital World’s chief executive, Patrick Orlando, said late Thursday that the company would instead postpone a long-awaited meeting until Oct. 10 without giving further details, indicating that the company is still struggling to garner enough shareholder support.

The company has said in filings that Arc Capital, the Shanghai-based investment advisory firm that finances and sponsors Digital World, may pay $2.8 million to give the company another three months to seal the deal without shareholder approval.

Even that may not be enough time. Ongoing investigations by the Securities and Exchange Commission and federal prosecutors have frozen the merger indefinitely. In an SEC filing Wednesday, Digital World reprinted an item from a pro-Trump blog post that urged the SEC to “end its probe.”

Digital World’s charter allows the executives a further three-month extension after this, at a similar price, to complete the deal. If the merger still isn’t completed by then, Digital World has said it could be forced into liquidation, returning all of its money to investors and leaving Trump’s operation with nothing.

The loss once again casts doubt on the most important backer of Trump’s post-presidency business ventures. Digital World has long been identified as Truth Social’s key source of funding, and there is no clear financial replacement if the money disappears.

Trump’s company said it is working to sell ads on Truth Social, but has yet to report any revenue. In May, Digital World said in an SEC filing that Trump’s company is running out of loans, including $15 million in bridge financing from earlier this year, that could allow it to pay its bills through at least April 2023.

Trump has tried to downplay the issue, posting this weekend on Truth Social: “I don’t need funding, ‘I’m really rich!’ But the company is already facing a dispute with a conservative online services company over allegedly unpaid bills.

Trump’s Truth Social is moving closer to a financial cliff

Digital World needed 65 percent of shareholders to vote to extend the deal for another year. But not enough voted, said Orlando.

Orlando and other investors had campaigned vigorously in recent days to gather enough shareholder support, including at Truth Social, a Twitter clone that has faced technical problems and low activity in the more than six months since its launch.

“We’re in the middle of this potentially historic vote, and I just want to make sure that all the ‘re-truthing,’ ‘quote-truthing,’ follow each other and make sure there are no DWAC shareholders left,” Orlando said in a Truth Social video last week, using the platform’s words for “retweet” and “quote tweet.”

The meeting was originally scheduled for Tuesday, but was postponed so the company could register more votes, Orlando said. On Thursday, the meeting was adjourned twice more before Orlando spoke at 5pm and said the meeting would again be adjourned until October 10.

Digital World’s share price rose about 1 percent Thursday, to $23, and fell in after-hours trading after the postponement. It is down nearly 90 percent from its peak of $175 shortly after its market debut.

Shortly before the meeting was postponed, Orlando wrote on Truth Social that “important information” will be disseminated on the website later Thursday. Some on the site reacted with concern to the move. “This is not good. They should have at least taken questions,” wrote one user.

Trump’s Truth Social’s disastrous launch casts doubt on its long-term viability

Truth Social has become Trump’s main Internet megaphone, even though his audience there is about 95 percent smaller than the Twitter following he had before losing the White House.

Trump was banned from all major social networks after his supporters stormed the US capital over his false allegations of election fraud on January 6, 2021.

Truth Social has other things to worry about beyond its financial survival. Google told Trump’s company last month that it wouldn’t let Truth Social go live on the Android app store until it could show it was effectively moderating posts on the site, including removing physical threats and incitement to violence, a Google spokesperson told The Washington Post . Both companies have said they are working on the matter.

Google sent its message to the company about a week after an armored gunman tried to break into a Cincinnati field office of the FBI, an agency Trump has routinely vilified. Ricky Shiffer, the suspect who police said was killed in a shootout, had been a prolific user on Truth Social, urging followers to “kill [FBI agents] In sight.”

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