A potential merger involving former President Donald Trump’s social media platform Truth Social can take the company public and will give him access to $3.5 billion in funds—a deal which his political rivals are looking to thwart.
With the SEC nod, all that is left for the merger to be completed is shareholder approval. DWAC has scheduled a shareholder vote on the merger for March 22. A SPAC merger usually closes within a few days after getting the approval.
However, the merger is facing Trump-related risks. DWAC said in a Feb. 16 filing that the merger may be delayed by third parties. Political opponents of President Trump could seek to block the merger to prevent his “potential financial gain,” DWAC said.
“The New York State CONSPIRACY (WITCH HUNT!) against Crooked Joe Biden’s Political Opponent, ME, is the greatest and most dangerous Political HOAX in the history of our Country!” President Trump said in a Feb. 26 post at Truth Social.
The ruling against President Trump has been heavily criticized. During an interview with CNN, businessman Joe Lonsdale said that the U.S. government is being weaponized against President Trump.
“It’s like basically what happens in these countries when you have a regime takeover that’s going after its enemies, as you weaponize it and you penalize people in ridiculous ways. This [Trump’s case] is an obvious example of that,” he said.
“This is why it’s scary to my friends who do business, who don’t even like Trump, because it’s a $400 million fine for something where there’s no victims ... is obviously a weaponization of government and everyone knows on its face.”
Merger Cash-Out
President Trump cannot cash out his stake as soon as the merger is completed. All shareholders of the new entity, including the former president, will be subject to a lockup period of six months, during which time they are prohibited from selling shares.The only way out of the lockup period is if DWAC gives a waiver. The lockup period exists to prevent major shareholders from cashing out immediately after merging, which will crash stock prices. Shareholders will also be prohibited from offering shares as collateral to raise loans during the lockup period.
A potential way to benefit from the stake during the lockup term could be by transferring shares to a trust and then using the trust to pledge the stock and raise a loan. Another way could be by transferring the shares to an immediate family member.
Another potential cause of delay could be TMTG co-founders Andy Litinsky and Wes Moss, who together own an investment company, UAV. The duo claims that an agreement they had with President Trump in 2021 gives them the right to appoint two directors to the TMTG board.
“Assertions made by UAV, and the potential claims arising therefrom, could lead to substantial legal costs, distract management, and have adverse effects on the business operations and financial health of TMTG and/or the Combined Entity,” DWAC said in the filing.
Given the legal fines and mounting litigation costs, the financial gain from this business deal will certainly be a boost for the leading 2024 GOP candidate.
Meanwhile, legal scholar Jonathan Turley called the “obscene” fine imposed on the former president a test for the “New York legal system’s integrity” in a Feb. 17 opinion piece in The Hill.
“The judgment against Trump (and his family and associates) was met with a level of unrestrained celebration by many in New York that bordered on the indecent,” he wrote. “The damages against Trump [are] greater than the gross national product of some countries, including Micronesia.”
He predicted that the impact of the ruling on New York businesses is “likely to be dire.”
“After this week, drawing new businesses to the city is going to be about as easy as selling country estates during the French Revolution,” Mr. Turley stated. “The one hope for New York businesses may be the U.S. Supreme Court,” which could intervene in the matter.
