Trump's Truth Social faces new challenge
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Sarah Grillo/Axios
Truth Social, the Twitter clone launched by former President Trump, may need to find a new path to the public markets.
Driving the news: Reuters reports that blank check company Digital World Acquisition Corp. didn't secure enough shareholder approval to extend the merger closure deadline with Truth Social by one year, with the current deadline set to expire this Thursday.
- There has not been any formal announcement from DWAC, which will announce the vote results later today at a special shareholder meeting.
- CEO Patrick Orlando has been quiet on Truth Social for several days, after a flurry of "truths" and media appearances last week — all aimed at hitting the 65% shareholder approval threshold
To some extent, the vote failure was to be expected.
- The deal and SPAC are the subject of various government investigations. Truth Social doesn't generate any revenue, has failed to pay vendor bills and hasn't been able to get its Android app approved by Google. Plus, there are ongoing questions about who even sits on Truth Social's board of directors.
But there was plenty of reason to think the extension might pass.
- The majority of DWAC shareholders are retail investors, many of whom likely bought in when the price was many multiples above the $10 liquidation mark. Sunk cost theory and all.
- Plus, many DWAC backers view Truth Social more as a cause than as a company.
What next: DWAC still has a few levers it could pull. One would be to extend the vote deadline by a day or two, particularly if it’s within striking distance of that 65%.
- It also has the right to unilaterally extend the SPAC life by up to six months, via a pair of three-month extensions. This could let it continue to work on the Truth Social deal, hoping the investigations dissipate and that the PIPE investors also extend, or search out new targets.
- But ... were it to enact the extensions, DWAC's sponsor would be required to invest over $6 million that wouldn’t be recoverable in the absence of a completed deal.
- As for Truth Social, the company claims to have enough money to last through April 2023. But it also was counting on over $1.2 billion in new capital via the SPAC merger.
The bottom line: This merger was always a volatile mix of grievance politics, SPACs and memes. Not surprising that it's been a bumpy ride.
Go deeper...
