Jean MartinA former executive of the blank-check acquisition vehicle aiming to take Donald Trump’s social media company public has filed a lawsuit to halt the deal, citing concerns over inadequate compensation.
ARC Global Investments II, controlled by Patrick Orlando, alleges that it is not receiving the appropriate amount of stock it is entitled to in Digital World Acquisition Corp (DWAC) following its merger with Trump Media & Technology Group Corp (TMTG).
Legal Battles Unfold:
The lawsuit, filed in Delaware, seeks to expedite proceedings before the DWAC shareholders’ vote on March 22.
Meanwhile, shares in DWAC experienced a 9% decline in Thursday’s trading, closing at $41.16. Responses from Orlando and the legal representatives of DWAC and Trump’s company are pending.
ARC’s legal action comes after DWAC warned of potential delays due to Orlando’s opposition to the merger. Trump’s media company and DWAC retaliated by suing ARC and Orlando in Sarasota, Florida, accusing them of attempting to impede the merger for personal gain.
Dispute Over Share Conversion Ratio:
At the heart of the dispute lies the conversion ratio of ARC’s class B DWAC shares to Class A shares upon merger closure.
While Orlando’s ARC claims it should receive 1.78 class A shares per class B share, DWAC asserts the ratio to be 1.34, leading to a difference of over 2.5 million shares.
Additional Legal Challenges:
In a separate lawsuit, former contestants of Trump’s reality TV show The Apprentice, Andy Litinsky and Wes Moss, filed against Trump’s company.
They allege that a proposed increase in equity capital from 120 million to 1 billion shares aims to enrich Trump at their expense, diluting their stake.
Financial Strain and SEC Clearance:
Trump faces mounting legal fees, with judgments exceeding $500 million. His company, TMTG, faces financial losses, having borrowed $40.5 million and issued $9.2 million in convertible promissory notes.
Despite these challenges, the U.S. Securities and Exchange Commission has greenlit the merger, potentially valuing the combined entity at $10 billion.
Regulatory Scrutiny and Company Changes:
Since its merger agreement in October 2021, DWAC has faced scrutiny from the U.S. Department of Justice and reached an $18 million settlement with the SEC over inaccurate disclosures.
The company has undergone board changes and attributed its merger difficulties to Orlando.
