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The legal standoff between Donald Trump and a former business partner has come to a head, with a vote set to determine whether or not the former US president can cash in on a potential $3.5 billion windfall by getting the company behind his Truth Social network.
A shareholder vote to approve a deal between a special purpose acquisition company called Digital World Acquisition Corporation and Trump Media & Technology Group is scheduled for Friday. But Patrick Orlando, whose Arc Global Investments is DWAC's largest investor, has so far refrained from casting a vote.
Orlando is the former CEO of Blank Checks and a member of its board of directors. But he threatened to withhold his support for the deal.
In a lawsuit filed by DWAC against Arc Global on Tuesday, lawyers representing Spac claim Orlando should vote in favor of the deal and accuse him of holding the vote “hostage for his personal financial gain.”
Orlando, which filed a lawsuit in February to block the deal unless it receives a larger distribution from the deal, did not respond to a request for comment.
The question about the listing, which if approved next week, comes as Trump faces mounting legal bills. The former president said he may need to unload valuable properties at auction to raise nearly $500 million to prevent a fraud conviction in New York.
SPACs raise money by listing on a stock exchange and then look to acquire a company that will eventually go public. The 145 percent rise in DWAC shares since the beginning of this year has increased the fully diluted implied value of TMTG, the company seeking to go public, to about $9 billion.
Although Trump is subject to a lock-in agreement that prohibits Orlando from selling his shares for six months, his more than 40 percent stake could provide a much-needed financial lifeline if the deal goes through.
Orlando's influence stems from the bonus shares he received as a reward for creating the special purpose acquisition company. The Florida-based businessman controls 14.8 percent of DWAC's outstanding shares. Regulatory filings show that if he does not support the deal, DWAC will have to rally nearly 60 percent of its remaining shareholders, mostly retail investors, to support it.
DWAC has struggled on several occasions to mobilize its shareholders to vote on the resolutions it has proposed, and recently warned that it may have difficulty reaching the voting threshold needed to approve the TMTG deal.
“The professional relationship between Mr. Orlando and Digital World has become so strained and continues to deteriorate that there can be no assurance that Mr. Orlando as a current member of our board of directors or as a controlling affiliate of the sponsor will be cooperative,” DWAC warned. In a file last month.
“Accordingly, it may be difficult for us to obtain the required vote of approval…in a timely manner or at all, which may lead to our liquidation.”
Orlando, a little-known Miami businessman before his dealings with Trump, oversaw DWAC during a turbulent period. The company was subject to a number of regulatory investigations that delayed the closing of the TMTG deal, which was initially announced in late 2021.
DWAC fired Orlando as CEO in March 2023, and appointed Eric Swider, a businessman living in Puerto Rico, to the position. Shortly thereafter, the company paid $18 million to settle an SEC investigation into disclosures made around its 2021 initial public offering.
Besides the potential returns for Trump from the deal, three hedge funds also stand to make significant profits. Anson Funds, Mangrove Capital Partners and All Blue Capital, which agreed to participate in a $50 million convertible debt offering this year after other funds pulled out, had gains of more than $400 million as of DWAC's closing price of $42.81 on Thursday. According to Financial Times calculations.
Anson, Mangrove and All Blue Capital did not respond to requests for comment.
“The return will be amazing,” said one person involved in the financing. Trump's advisers have kept him on the sidelines. . . They want to make this vote clear without any problems with the government. Then, on Tuesday, when trading begins, it's game on for Trump.
Additional reporting by Sujit Indab in New York
