Investors withdrew about $140 million in pledges to a “blank-check” corporation contemplating a merger with the parent company of Donald Trump’s Truth Social forum, the latest impediment to the agreement.
Digital World Acquisition Corp., a so-called special-purpose acquisition company, disclosed in a regulatory filing on Friday that unidentified investors have filed “termination warnings” totaling around $138.5 million out of a total of $1 billion in commitments to the merged firms.
Digital World did not respond to a request for comment immediately. According to Reuters, one of the investors who backed out of the merger is Sabby Management, which had offered $100 million. In addition, Sabby Management did not immediately respond to a request for comment.
Monday morning trading saw shares of Digital World decline 17 cents, or 1%, to $16.33 per share. The share price has fallen 68% this year.
This year, the merger between Digital World and Trump Media & Technology Group, the parent company of Truth Social, has encountered various obstacles, including probes by both the Securities and Exchange Commission and the Department of Justice. Due to the delays caused by the investigations, Digital World requested its shareholders for more time to conclude the merger earlier this month.
Trump’s Truth Social does not generate advertising income. 02:44
Specifically, the SEC investigation represents a hurdle for the company because the government must approve the Digital World-Trump Media merger before it can be finalized. Trump has referred to the investigations as “witch hunts” motivated by politics.
Delay permits investors to flee
Digital World has requested its shareholders for further time to consummate the purchase, which was originally scheduled to close on September 6. But earlier this month, the company’s shareholders did not support a one-year delay to complete the transaction. Since then, Digital World has postponed its shareholder vote until October 10.
As originally envisioned, the merger between Digital World and Trump Media & Technology Group would result in the transfer of $1,3 billion to the former president’s media company. Institutional investors promised the remaining $1 billion through a so-called “private investment in public equity” or PIPE investment.
In accordance with the agreement with PIPE investors, they may terminate their securities purchase agreements if the transaction has not concluded by September 20, according to a regulatory filing published on Friday.
Digital World stated that it is also possible for the PIPE to be reorganized or renegotiated “in light of the PIPE’s closing terms, changing market conditions, and evolving regulatory requirements.”