Aug 16, 2023 - Economy

Trump could keep control of Truth Social, even if he sells most of it

Photo illustration of Trump standing in front of a wall of patterned Truth Social logos

Photo illustration: Annelise Capossela/Axios. Photo: Julie Bennett/Getty Images

Former President Trump will get to keep control of his social media company, even if he sells most of his shares after it goes public.

Driving the news: Digital World Acquisition Corp., the blank check company merging with Truth Social's parent, recently disclosed the creation of a new class of high-vote stock of which Trump will be the only holder.

  • He gets 55% voting power so long as he maintains just one of these superpowered shares.

Why it matters: Trump, who is believed to own almost all of Trump Media & Technology Group, could cash out while continuing to call the shots.

  • It's valuable optionality, given that the majority of SPAC stocks sink post-merger.
  • DWAC continues to trade above its $10 par price, closing yesterday at $16.73 per share. Its all-time high closing price was $97.51 per share in March 2022.

The big picture: This is hardly the only corporate issuance of high-vote stock, although it's usually granted to a founder who's also serving as CEO or another top-level executive role.

  • Trump is believed to be company chairman, although there are some questions about that, but doesn't have an operational role beyond being Truth Social's most popular poster.

Reality check: There's still no guarantee that the merger will happen.

  • DWAC did recently settle with the SEC over misleading investors, agreeing to pay an $18 million penalty, but also again pushed back the closing date — this time from Sept. 8 to year-end.
  • It also has yet to file its required quarterly reports for Q1 or Q2 2023. This may be due to an ongoing dispute with accounting firm Marcum, which recently quit and has since claimed misrepresentations by DWAC management.

The intrigue: The original merger agreement noted that Trump's "ownership and position in the Company shall be structured in such a way as to eliminate the need for restructuring of ownership or changes in position were a Material Disruptive Event to occur."

  • MDE was defined as Trump either announcing a run for public office or being convicted of a felony criminal offense after the merger closes.
  • He announced his presidential bid already (i.e., before the close), but clearly the latter MDE remains in play.
  • There's no additional information about how the MDE contingencies were structured, and if they're impacted by the new share class (or if the new share class is the protective structure). DWAC didn't return a request for comment.
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