YEREVAN (CoinChapter.com) — The shares of Digital World Acquisition Corp (DWAC) fell sharply after its executives announced they would postpone the shareholder vote where it hoped to get an extension to complete the anticipated merger with Truth Social.
Investors, who fear the merger might fail to take place, are shunning its stocks. Truth Social is the social media company of former U.S. President Donald Trump.
DWAC’s shares fell over 22% from $25.82 on Friday to $20.10 on Tuesday, according to data by Google Finance. Moreover, the company’s stocks have decreased by around 30% in the past 30 days. It has shed over 57% year to date.
Why are the Shares of Digital World Acquisition Corp falling?
The Digital World Acquisition Corp (DWAC) is a special purpose acquisition company (SPAC), also known as a blank-check firm. It was specifically formed to merge with Trump Media & Technology Group’s venture Truth Social.
The former U.S. President floated the allegedly right-wing social media platform after giants Twitter, and Facebook banned him in 2021. Via DWAC, Trump hopes to launch his company on the stock market.
When Digital World Acquisition Corp (DWAC) launched in September 2021, it announced it would complete the acquisition of Truth Social within a year.
Its shares had surged last year upon news of the merger, reaching a high of $175 per share. However, having failed to acquire the company within the stipulated time, it turned to shareholders to seek an extension. It needs the support of at least PAC 65% of shareholders for the same.
Meanwhile, according to reports, the numbers fell embarrassingly short, thus forcing the company to call another meeting on Thursday. If the company fails to garner the much-required support, it will risk facing an immediately forced liquidation.
“Without the extension, the board believes that there is significant risk that we might not, despite our best efforts, be able to complete the business combination on or before the termination date,”
the company wrote in its August 25 in a Securities and Exchange Commission (SEC) filing. However, the company can still grant itself a six-month extension without the shareholders’ approval. However, attempts to do so may prove futile as DWAC still faces investigations from authorities.
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Trouble for DWAC from the SEC
The failure of DWAC to get investors’ support for a 12-month extension comes as a major blow to Donald Trump’s Truth Social.
Trump Media & Technology Group (TMTG) was set to receive a $1.3 billion cash infusion from DWAC as part of the deal from last October that would take the social media platform public.
However, TMTG also faces a possible $1.6 million lawsuit from hosting partner RightForge.
The conservative American company, which aims at providing internet hosting for conservative causes, alleges Truth Social has failed to pay its dues for the services.
Meanwhile, Digital World Acquisition Corp has enough troubles of its own.
In June 2022, the company disclosed in a regulatory filing that its directors had received subpoenas from a federal grand jury in New York.
The Securities and Exchange Commission (SEC) has also investigated the merger deal. Owing to the sudden surge in stock prices, the SEC has demanded documents to verify if the company executives indulged in illegal business practices.
Moreover, the Financial Industry Regulatory Authority (FINRA) also cracked the whip. FINRA has sent the company “preliminary, fact-finding inquiries” regarding the planned merger.
The Regulator wants details of DWAC’s stock before the October 20 merger announcement, which sent the share prices soaring 800% from $9.96 to $94.20 in two days.
With the deadline now knocking on the company’s door, it will be clear on Thursday if DWAC will live to see another day or will face a forced liquidation.
Meanwhile, the mid-term elections are due in November. Truth Social’s failure to go public can also hurt Trump’s ambitions of a political comeback.
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