Investors are pulling out millions of dollars from Digital World Acquisition Corporation, a company that intends to merge with Donald Trump’s Truth Social platform.
The special purpose acquisition company in a Securities and Exchange Commission filing, disclosed that investors have backed out of $140 million in commitments of the $1 billion previously announced by the company.
Following this move from investors, the company shares are currently trading at around $20, down significantly from $97 highs earlier this year, but still above the $10 liquidation price.
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The investors who signed up for the deal about a year ago were able to back out if it was not completed by September 20.
Investors who walked away were however not disclosed in the filings, but it was reported that a company, Sabby Management, which planned to put in $100 million, has opted out.
Sources have disclosed that more investors may also withdraw their commitments now that the deadline has passed and are awaiting more favorable terms to be put to them by the company.
Digital World Acquisition Corp. has struggled to close the Truth Social merger deal and has previously blamed the SEC for delaying the deal amid criminal and civil investigations.
The Securities and Exchange Commission (SEC) started examining the deal in June over the possibility that Trump Media and Digital World had held discussions before the special purpose acquisition company (Spac) went public last year without informing the watchdog.
As a result of this, the directors of Digital World received subpoenas in June from a grand jury in the Southern District of New York.
Digital World has faced difficulty in getting sufficient shareholder approval for the merger and could be forced to liquidate and return investors’ cash if the deal is not completed.
The company however disclosed earlier this month its extension of deadline for completion by three months.
A key vendor had previously complained that Truth Social bills were going unpaid. A major web-hosting operator said Truth Social owed about $1.6 million in contractually obligated payments, an allegation suggesting the operation’s finances are in significant disarray.
In another setback, Truth Social’s application for a trademark was turned down last month because its name was too similar to other operations.
Truth Social is hardly the juggernaut some investors had hoped. The social media platform is largely a forum for Trump, who repeatedly posts messages touting himself and reposts articles from right-wing media praising him each day.
Trump launched Truth Social after he was booted off Twitter in the wake of the Jan. 6, 2021, riot at the U.S. Capitol. Ever since then, Trump has been using the Truth platform much as he did with Twitter to hit back at his enemies, also stating how he won the 2020 U.S presidential election which brought in President Joe Biden.
Last month, Digital World warned in an SEC filing that a dip in Trump’s popularity could hurt the business. The filing noted that Truth Social’s success hinges on the “reputation and popularity” of the investigation-plagued Trump, who chairs the Trump Media and Technology Group, which owns and operates the social media platform.
The SEC filing reads, “In order to be successful, TMTG will need millions of those people to register and regularly use TMTG’s platform,” the filing warned. “If President Trump becomes less popular or there are further controversies that damage his credibility or the desire of people to use a platform associated with him,” the planned merger with Digital World “could be adversely affected”.