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A legal stand-off between Donald Trump and a former business partner is coming to a head, with a vote set to determine whether or not the former US president can unlock a potential $3.5bn windfall by taking the company behind his Truth Social network public.
A shareholder vote to approve a deal between a special purpose acquisition company called Digital World Acquisition Corporation and Trump Media & Technology Group is planned for Friday. But Patrick Orlando, whose Arc Global Investments is the largest investor in DWAC, has so far held out on casting his vote.
Orlando is the former chief executive of the blank-cheque company and sits on its board. But he has threatened to withhold his support for the transaction.
In a lawsuit filed by DWAC against Arc Global on Tuesday, lawyers acting on behalf of the Spac allege that Orlando must vote in favour of the deal and accuse him of holding the vote “hostage for his personal financial gain”.
Orlando, who in February sued to block the deal unless he receives a larger distribution from the transaction, did not respond to a request for comment.
The question over the listing, which if approved will go ahead next week, comes as Trump is facing mounting legal bills. The former president has said he may need to offload prized properties in a fire sale to raise almost $500mn to prevent the enforcement of a fraud judgment in New York.
Spacs raise money through a stock exchange listing and then look to acquire a company that will eventually go public. A 145 per cent surge in DWAC’s shares since the start of this year has boosted the implied fully diluted valuation of TMTG, the business it is seeking to take public, to about $9bn.
Though Trump is subject to a lock-up agreement that prevents Orlando from selling his shares for six months, his stake of more than 40 per cent could provide a much needed financial lifeline if the deal goes through.
Orlando’s sway stems from free shares he received as a reward for setting up the Spac. The Florida-based businessman controls 14.8 per cent of DWAC’s outstanding shares. Regulatory filings show that if he does not back the deal, DWAC would have to rally almost 60 per cent of its remaining stockholders, who are mostly retail investors, to support it.
DWAC has on several occasions struggled to rally its shareholders to vote for resolutions it proposed and it recently warned that it could face difficulty hitting the voting threshold necessary to approve the TMTG deal.
“The professional relationship between Mr Orlando and Digital World became strained and has continued to deteriorate such that there is no assurance that Mr Orlando as a current member of our board or as a controlling affiliate of the sponsor will be co-operative,” DWAC warned in a filing last month.
“Accordingly, it could prove difficult for us to obtain the requisite vote for approval . . . in a timely fashion or at all, which could lead to our liquidation,” it added.
Orlando, a little-known Miami businessman prior to his dealings with Trump, oversaw DWAC during a tumultuous period. The company was subject to a number of regulatory probes which delayed the closing of the TMTG deal, initially announced in late 2021.
DWAC dismissed Orlando as chief executive in March 2023 and installed Eric Swider, a businessman living in Puerto Rico, in the position. Shortly afterwards, the company paid $18mn to settle a Securities and Exchange Commission investigation over disclosures made around its 2021 initial public offering.
Beyond Trump’s potential payout from the deal, three hedge funds also stand to make a significant profit. Anson Funds, Mangrove Capital Partners and All Blue Capital, which agreed to participate in a $50mn convertible debt offering this year after other funds had walked away, are sitting on more than $400mn in gains as of DWAC’s closing price of $42.81 on Thursday, according to calculations by the Financial Times.
Anson, Mangrove and All Blue Capital did not respond to requests for comment.
“The return will be amazing,” said a person involved in the financing. “Trump’s advisers have been keeping him on the sidelines . . . they want to get this vote clear with no issues with the government. Then, on Tuesday when it starts trading, it is game on for Trump.”
Additional reporting by Sujeet Indap in New York
