The long-delayed and highly controversial deal to bring Truth Social and the Trump media empire to Wall Street has a new twist – the merger could get terminated by either party.
Under an updated merger agreement, both parties in the deal will have the opportunity to kill the merger between October 31 and November 21, according to a regulatory filing on Monday.
Digital World Acquisition Company, the firm that’s been trying for two years to buy Trump Media & Technology Group, can terminate the deal if, after “updated due diligence, its board of directors no longer believes it’s in the best interest of the firm or its shareholders,” the filing said.
Likewise, Trump Media can terminate the deal for the same reasons over the same window of time.
The parties did not explain why the new termination language was added to the merger agreement. Digital World’s shares fell 4% on Monday.
Digital World is a special purpose acquisition corporation, or SPAC, that exists solely to bring a private company public. The so-called blank-check firm targeted Trump Media in the fall of 2021.
But the proposed corporate marriage has been clouded by legal scrutiny and controversy. In June, federal prosecutors leveled insider trading charges against three investors, alleging they made more than $22 million by illegally trading on nonpublic knowledge of the secret merger plan.
In July, Digital World settled charges from the Securities and Exchange Commission, which alleged the company violated anti-fraud laws by failing to disclose it was actively pursuing a deal with Trump Media before that news went public.
Donald Trump himself has encountered intense legal problems since the SPAC deal was first announced, including multiple indictments. The revised merger agreement was announced Monday, as Trump was in court for the first day of the civil fraud trial against the former president, his eldest sons, their companies and Trump Organization executives.
“It’s fair to say that legally contemplating the termination of the merger like this raises the chances that the merger will terminate,” said Matthew Kennedy, senior IPO market strategist at Renaissance Capital, which provides pro-IPO research. “This deal has been in limbo for almost two years. That’s most of TMTG’s existence…The longer this drags on, it limits TMTG’s options as a company.”
However, Kennedy pointed out that both Digital World and Trump Media reaffirmed their commitment to getting the merger done in a press release on Monday.
Devin Nunes, the CEO of Trump Media, said in a statement that his company remains “focused on getting this deal done as soon as possible.”
Matthew Tuttle, CEO of Tuttle Capital Management, said he doesn’t think the new termination agreement will prove to be very significant.
“But this deal has been such a mess you can’t rule out either side taking advantage of that,” said Tuttle, whose firm issues exchange traded funds (ETFs), including some that focus on the SPAC market. “I don’t think Trump’s current legal troubles that impact his company help matters.”
Tuttle noted that investors are “betting the deal goes through” based on where Digital World shares are trading.
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