Reuters
September 05, 2022
By Svea Herbst-Bayliss
(Reuters) - The blank-check acquisition firm that agreed to merge with Donald Trump's social media company failed to secure enough shareholder support for a one-year extension to complete the deal, people familiar with the matter said on Monday.
At stake is a $1.3 billion cash infusion that Trump Media & Technology Group (TMTG), which operates the former U.S. president's Truth Social app, stands to receive from Digital World Acquisition Corp, the special purpose acquisition company (SPAC) that inked a deal last October to take TMTG public.
The transaction has been on ice amid civil and criminal probes into the circumstances around the deal. Digital World had been hoping that the U.S. Securities and Exchange Commission (SEC), which is reviewing its disclosures on the deal, would have given its blessing by now for the transaction to proceed.
Most of Digital World's shareholders are individual investors and getting them to vote through their brokers has been challenging, Digital World Chief Executive Patrick Orlando said last week.
Digital World needs 65% of its shareholders to vote in favor of the proposal to extend its life by 12 months for the move to become effective. By Monday evening, far fewer Digital World shareholders than those required had voted in favor, the sources said.
The outcome of the vote is set to be announced at a special meeting of Digital World shareholders on Tuesday. Digital World executives do not believe they will be able to muster enough shareholder support in time and have started to consider alternative options, according to the sources.
The sources requested anonymity because the vote tally figures have not been publicly announced. Representatives for Digital World and TMTG did not immediately respond to requests for comment.
One option being considered by Digital World is to postpone the vote deadline in a final bid to boost more shareholder support, the sources said. Without further action, the SPAC is set to liquidate on Thursday and return the money it raised in its September 2021 initial public offering.
Were Digital World to fail in its bid to get its shareholders to back the one-year extension, its management has the right to extend its life without shareholder approval by up to six months. It is unclear whether Digital World will pursue this option and if it would provide enough time for regulators to reach a conclusion on whether to allow the deal to proceed.
Digital World has disclosed that the SEC, the Financial Industry Regulatory Authority and federal prosecutors have been investigating the deal with TMTG, though the exact scope of the probes is unclear.
Among the information sought by regulators are Digital World documents on due diligence of potential targets other than TMTG, relationships between Digital World and other entities, meetings of Digital World's board, policies and procedures relating to trading, and the identities of certain investors, Digital World has said.
INDEBTEDNESS CAPPED
Were the deal to be completed, TMTG would receive $293 million that Digital World has on hand plus $1 billion committed from a group of investors in the form of a private investment in public equity (PIPE).
The PIPE is scheduled to expire on Sept. 20 unless the deal is completed. Investment bankers for Digital World have been reaching out to investors in the last few weeks to gauge their interest in extending the PIPE, a person familiar with the matter said.
It is unclear how TMTG is getting by without having access to Digital World's funding. It raised $22.6 million through convertible promissory notes last year and an additional $15.4 million through bridge financing in the first quarter of this year. The agreement with Digital World caps the indebtedness that TMTG can assume prior to the deal closing at $50 million.
Digital World has said it believes TMTG will have "sufficient funds" until April 2023. TMTG said last week that Truth Social is "on strong financial footing" and would begin running advertisements soon.
Trump started using Truth Social in April, two months after it launched on Apple Inc's app store. He currently has more than 4 million followers - a fraction of the 89 million he had on Twitter Inc before he was banned over his role in the January 2021 U.S. Capitol riots by thousands of his supporters.
(Reporting by Svea Herbst-Bayliss in Rhode Island; Additional reporting by Echo Wang and Krystal Hu in New York; Editing by Greg Roumeliotis and Edwina Gibbs)
Opinion | What the Truth Social Flop Says About Trump
He’s a bad businessman who has worn out his meme.
Another inherent Truth Social liability that Trump and company should have considered was Truth Social’s unavoidable posturing as a Trumpian site for conservatives. | Leon Neal/Getty Images
Opinion by JACK SHAFER
09/10/2022
Jack Shafer is Politico’s senior media writer.
The slow-cooking financial disaster that has been simmering in Donald Trump’s business Crock-Pot is now coming to a boil. Truth Social — the Twitter knock-off the former president launched six months ago in reaction to Twitter, Facebook, and YouTube’s decision to deplatform him — might reduce itself to the smoke and char of bankruptcy, according to recent business press reports.
The swill the site serves attracts only a fraction of what Twitter does. Google has yet to approve downloads of its app from the Play Store over moderation issues, blocking it from 40 percent of the smartphone market. It lost $6.5 million in the first year and seems unable to pay its bills. But worst of all, the merger plan that would give it a stock market listing and the $1.3 billion it hoped to raise has stalled.
Once upon a time, Trump fed his 89 million Twitter followers a several-times-a-day mash of insult, provocation and bombast. But he has attracted only an estimated 3.9 million to his Truth Social account, making him one of the biggest social media flops of the decade. Where did the magic go? Why have Trump’s followers forsaken him? Is Truth Social doomed?
Trump deserves credit for marketing his Twitter account to its Everestian heights. He’s always known how to play to the crowds, titillate them and leave them wanting more. During his first campaign and presidency, even a garden-variety Trump tweet could convulse newsrooms. But that was a function of his front-runner status and later his place in the Oval Office. He drew an enormous audience not because he was Donald Trump tweeting but because he was the tweeting president. The power of the office endowed his tweets with muscle that could move financial markets, bury political careers, inspire death threats against his enemies and make the press snap to attention. But exiled to Mar-a-Lago and denied his social media accounts rendered him just another celebrity squeaking noises from a tiny soapbox. When his profile shrank, he became easier to ignore.
Trump announces his own social media platform
Even so, why didn’t the tens of millions of the 89 million who followed him on Twitter or the 74 million who voted for him in 2020 make more of an effort to visit his new address? Blame it on the network effect. If you already have a Twitter account, it takes just a millisecond to click and add another person’s feed to your account. But downloading a new app just to follow a single somebody takes mental energy, especially if there aren’t many other accounts on the app you wish to follow. Trump out of office proved to be as boring as Trump in office was disruptive. Everything we’re learning about Trump’s inability to convene a large-scale audience on Truth Social we learned in miniature from the failure of his mid-2021 blog, which he killed after 29 days. Like most media figures, Trump needs the boost of the network effect provided by Twitter (or CNN or Fox News Channel) to build a mass audience. All by his lonesome, he’s just a political carny on a lightly trafficked midway shouting invitations to his freak show.
Plenty of Trump’s followers were either agnostic about his tweets or politically hostile to them. Many followed him just to stay in the know or for the hate clicks.
This is not to say you can’t build a good business serving mostly Trumpians or mostly conservatives or mostly liberals. But such narrowcasting comes at the expense of winning the largest potential customer base. Twitter wisely places no political litmus tests, real or implied, between aspiring account-holders and an account as long as they promise not to spew bilge from their perch. Everybody is accepted. By appearing exclusionary, Truth Social resigned itself to marginal appeal.
Nothing about Truth Social’s disastrous beginnings should surprise us. Donald Trump has proved himself again and again to be a wreck of an entrepreneur. Steaks, his university, water, an airline, casinos, the USFL, a mortgage company, vodka — the list reads like a guide on how not to succeed in business. Associating Trump with a new venture has become a business death wish.
Trump is still the frontrunner for the Republican presidential nomination in 2024 and could well wind up in the White House (assuming he’s not behind bars). But there’s also evidence that Trump has simply exhausted the Trump meme he invented. Trump’s deranged outrage style once contained real entertainment value — which explains why moderates and liberals followed him on Twitter even if they wouldn’t vote for him. But in his post-presidency and especially in the weeks following the Mar-a-Lago search and investigation, the show has gone stale. Vainly, he has sought to top himself by sharing QAnon-related material on Truth Social, denouncing the FBI like a madman trapped in a bunker, and calling for his reinstatement as the “rightful winner“ of the 2020 election. He’s become a carnival geek biting the heads off of snakes, which can be a fabulous show the first couple of times you see it, but after that, meh. Could today’s Trump devise enough fresh outrage to produce even a brief TikTok?
He’s a bad businessman who has worn out his meme.
Another inherent Truth Social liability that Trump and company should have considered was Truth Social’s unavoidable posturing as a Trumpian site for conservatives. | Leon Neal/Getty Images
Opinion by JACK SHAFER
09/10/2022
Jack Shafer is Politico’s senior media writer.
The slow-cooking financial disaster that has been simmering in Donald Trump’s business Crock-Pot is now coming to a boil. Truth Social — the Twitter knock-off the former president launched six months ago in reaction to Twitter, Facebook, and YouTube’s decision to deplatform him — might reduce itself to the smoke and char of bankruptcy, according to recent business press reports.
The swill the site serves attracts only a fraction of what Twitter does. Google has yet to approve downloads of its app from the Play Store over moderation issues, blocking it from 40 percent of the smartphone market. It lost $6.5 million in the first year and seems unable to pay its bills. But worst of all, the merger plan that would give it a stock market listing and the $1.3 billion it hoped to raise has stalled.
Once upon a time, Trump fed his 89 million Twitter followers a several-times-a-day mash of insult, provocation and bombast. But he has attracted only an estimated 3.9 million to his Truth Social account, making him one of the biggest social media flops of the decade. Where did the magic go? Why have Trump’s followers forsaken him? Is Truth Social doomed?
Trump deserves credit for marketing his Twitter account to its Everestian heights. He’s always known how to play to the crowds, titillate them and leave them wanting more. During his first campaign and presidency, even a garden-variety Trump tweet could convulse newsrooms. But that was a function of his front-runner status and later his place in the Oval Office. He drew an enormous audience not because he was Donald Trump tweeting but because he was the tweeting president. The power of the office endowed his tweets with muscle that could move financial markets, bury political careers, inspire death threats against his enemies and make the press snap to attention. But exiled to Mar-a-Lago and denied his social media accounts rendered him just another celebrity squeaking noises from a tiny soapbox. When his profile shrank, he became easier to ignore.
Trump announces his own social media platform
Even so, why didn’t the tens of millions of the 89 million who followed him on Twitter or the 74 million who voted for him in 2020 make more of an effort to visit his new address? Blame it on the network effect. If you already have a Twitter account, it takes just a millisecond to click and add another person’s feed to your account. But downloading a new app just to follow a single somebody takes mental energy, especially if there aren’t many other accounts on the app you wish to follow. Trump out of office proved to be as boring as Trump in office was disruptive. Everything we’re learning about Trump’s inability to convene a large-scale audience on Truth Social we learned in miniature from the failure of his mid-2021 blog, which he killed after 29 days. Like most media figures, Trump needs the boost of the network effect provided by Twitter (or CNN or Fox News Channel) to build a mass audience. All by his lonesome, he’s just a political carny on a lightly trafficked midway shouting invitations to his freak show.
Plenty of Trump’s followers were either agnostic about his tweets or politically hostile to them. Many followed him just to stay in the know or for the hate clicks.
This is not to say you can’t build a good business serving mostly Trumpians or mostly conservatives or mostly liberals. But such narrowcasting comes at the expense of winning the largest potential customer base. Twitter wisely places no political litmus tests, real or implied, between aspiring account-holders and an account as long as they promise not to spew bilge from their perch. Everybody is accepted. By appearing exclusionary, Truth Social resigned itself to marginal appeal.
Nothing about Truth Social’s disastrous beginnings should surprise us. Donald Trump has proved himself again and again to be a wreck of an entrepreneur. Steaks, his university, water, an airline, casinos, the USFL, a mortgage company, vodka — the list reads like a guide on how not to succeed in business. Associating Trump with a new venture has become a business death wish.
Trump is still the frontrunner for the Republican presidential nomination in 2024 and could well wind up in the White House (assuming he’s not behind bars). But there’s also evidence that Trump has simply exhausted the Trump meme he invented. Trump’s deranged outrage style once contained real entertainment value — which explains why moderates and liberals followed him on Twitter even if they wouldn’t vote for him. But in his post-presidency and especially in the weeks following the Mar-a-Lago search and investigation, the show has gone stale. Vainly, he has sought to top himself by sharing QAnon-related material on Truth Social, denouncing the FBI like a madman trapped in a bunker, and calling for his reinstatement as the “rightful winner“ of the 2020 election. He’s become a carnival geek biting the heads off of snakes, which can be a fabulous show the first couple of times you see it, but after that, meh. Could today’s Trump devise enough fresh outrage to produce even a brief TikTok?
No comments:
Post a Comment