Former Architect of Trump's Truth Social Merger Initiates Lawsuit to Halt Potential $10B Deal

Former Architect of Trump's Truth Social Merger Initiates Lawsuit to Halt Potential $10B Deal

  • Friday, 01 March 2024 16:45

Former Executive Challenges Trump's Truth Social Merger in Lawsuit Over Payout Dispute

A former executive of the blank-check acquisition vehicle involved in taking Donald Trump's social media company public has initiated legal action to block the deal, citing a dispute over payout amounts. ARC Global Investments II, controlled by Patrick Orlando, alleges that it is being short-changed on the amount of stock it should receive in Digital World Acquisition Corp. as it merges with Trump Media & Technology Group Corp.

The lawsuit, filed in Delaware, seeks to expedite resolution of the stake prior to the March 22 vote by DWAC shareholders to approve the deal. Shares in DWAC saw a decline of about 9% following the news, closing at $41.16.

Orlando and the legal teams for DWAC and Trump's company have yet to comment on the matter. This lawsuit follows a prior warning by DWAC that Orlando could potentially delay the deal.

The dispute centers on the conversion rate of ARC's class B DWAC shares to class A shares upon merger closure. While ARC contends it should receive 1.78 class A shares for each class B share, DWAC maintains the ratio is 1.34. The discrepancy amounts to more than 2.5 million shares.

Trump's media company and DWAC have also filed a lawsuit against ARC and Orlando in Sarasota, accusing them of attempting to obstruct the merger and extort financial gains. DWAC seeks a declaration from the Florida court affirming the 1.34 conversion ratio.

Despite regulatory clearance from the Securities and Exchange Commission earlier this month, allowing Trump's company, which operates the Truth Social platform, to proceed with the merger, legal battles and financial challenges loom. The potential $10 billion combined valuation of the merged entity and the significant stake held by the former president add layers of complexity to the ongoing dispute.

DWAC originally signed the merger agreement with Trump's company in October 2021 but has since faced scrutiny from regulatory bodies and legal challenges. The company terminated Orlando and underwent board restructuring in the wake of these challenges.

In conclusion, the legal dispute surrounding the merger of Donald Trump's social media venture with Digital World Acquisition Corp. underscores the complexity and challenges inherent in high-profile corporate transactions. The lawsuits between former executives and involved parties highlight the significant financial stakes and differing interpretations of contractual agreements. As the March 22 vote approaches, the resolution of these legal battles will be crucial in determining the future of the merger and its impact on the parties involved. Additionally, the legal proceedings add further uncertainty to an already contentious deal, signaling potential hurdles ahead for both Digital World Acquisition Corp. and Trump Media & Technology Group Corp.