The settlement, which is subject to SEC approval, could help Trump’s firm release hundreds of millions of dollars it has been waiting for for months. But the filing also signaled tensions between the two companies that could undermine the deal altogether.
The merger agreement, which was originally set to close last year, is still frozen due to an SEC investigation, with Digital World asking for an additional one-year extension past the Sept. 8 deadline. In the submission documents, Digital World stated, “According to the e-mail, [Trump Media] We currently believe we will only be bound by the merger agreement through September 8, 2023. “
Digital World “expects cooperation with” [Trump Media] “We will address this disagreement in good faith in the best interests of our shareholders,” the filing said. “We are very interested in doing business with them going forward.” [Trump Media] and have hope [the companies] This difference of interpretation can be resolved. “
At this time, Digital World plans to liquidate on the same day and return $300 million to investors if the merger agreement fails.
Digital World said it believes the settlement “removes the cloud of uncertainty” that remains for the company and allows it to “move towards its goals” for “building an alternative media platform.” He added that Trump Media also reserves the right to fully terminate the merger agreement.
The SEC did not respond to a request for comment on Monday. Representatives for Digital World and Trump Media also did not respond.
In its September 2021 initial public offering filing, Digital World told the SEC that it “has not selected”, “directly or indirectly,” any business combination target, consistent with SEC rules requiring SPACs. have not had any substantive discussions.” Do not complete the merger before launch.
But in an indictment released last week related to allegations of securities fraud, federal prosecutors said former Digital World directors and other investors knew months before the merger and used that information. showed a text message suggesting that he tried to profit from it.
Former Trump Media executive Will Wilkerson also filed a whistleblower complaint with the SEC last year, alleging that merger talks violated securities laws. Trump Media fired him in October after he spoke with The Washington Post.
As part of the settlement, Digital World will amend its merger registration application, known as Form S-4, to ensure that it is “substantially complete and accurate,” and will pay an $18 million penalty after approval of the merger. proposed.
Michael Orrogge, a New York University law professor who studies SPACs, said the potential settlement looks like a positive step for the prospects of the digital world, but “still, getting regulatory approval for the merger is a big deal.” We are far from a completed deal.”
He said the Digital World would not satisfy the SEC, including the significant divergence between the valuation given to Trump Media in the October 2021 merger agreement (up to $1.7 billion) and the valuation given by Trump. “potentially difficult disclosure issues” still need to be resolved. He donated ($5 million to $25 million) to Trump Media in his April campaign filings.
Alllogge said the company still faces questions about other financing and legal risks, which could result in further delays in the transaction, or as investors try to get their money back, placing a huge liability on the combined company. added that it could impose Was fooled. “
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