Republican presidential candidate and former US President Trump delivers a speech at a Fraternal Order of Police conference in Charlotte, North Carolina, the United States, on September 6, 2024.
Jonathan Drake | Reuters
Trump Media The judge ruled that the company breached an agreement with an investor who helped take the company public and must grant the investor a larger share of the stock.
Investors ARC Global and other insiders, including majority shareholder Donald Trump, will be free to begin selling their stakes in the company behind Truth Social, the Delaware Chancery Court issued an order on Monday, three days after the announcement.
If these insiders choose to cash in their holdings, they could be in for a big payday. But they could also undermine investor confidence and drive down the value of Trump Media, which has lost billions of dollars in value during the months-long stock market rout.
Vice Chancellor Lori Will, the judge in the Delaware case, ruled that blank-check company Digital World Acquisition Corp. (DWAC) undervalued the number of shares of ARC Global that were part of the merger that took Trump Media public in March. .
But Weill also found in his 44-page ruling that ARC’s proposed stock conversion ratio was too high. She also dismissed a number of other claims made by ARC and DWAC as “baseless” diversions.
ARC purchased Class B shares of DWAC, a special purpose acquisition company that seeks to merge with another business and take it public.
After DWAC merges with Trump Media, these Class B shares should automatically convert to Class A shares at a 1:1 ratio. However, since the company issued more Class A shares after listing, different share conversion ratios were adopted.
DWAC puts the ratio at 1.3481 to 1.
“ARC is entitled to convert its 5,490,000 Class B shares into 8,186,345 Class A shares,” Will wrote in a separate order.
She also ordered the parties to work with the escrow agent to “release an appropriate number of shares to satisfy ARC’s conversion rights” so that investors “will be free to sell or transfer those shares upon expiration of the contractual lock-up period.”
The lock-up agreement, which expires on Thursday, bars Trump and other company insiders from selling their stock for about six months after the company began trading on Nasdaq as DJT.
The company is still worth more than $3.3 billion, even though its latest quarterly earnings report showed meager revenue and a net loss of millions of dollars.
Analysts are beginning to view individual investments in Trump media as a proxy for support for the Republican presidential candidate and a bet on his political fortunes.
Trump owns 114,750,000 shares, or nearly 57% of the company’s stock. As of noon Tuesday, the stake was worth nearly $2 billion, about half of Trump’s paper assets net worth Calculated according to Forbes.
But Trump said last week that he had “absolutely no intention to sell.”
DJT shares soared following the news.
Trump Media is also embroiled in other lawsuits against ARC and its founder, Patrick Orlando, as well as others involved in the public merger.
In a lawsuit in Florida, Trump Media warned that ARC and another investment vehicle, United Atlantic Ventures, planned to “immediately sell” more than 18 million DJT shares after the lockup period was lifted.
Trump Media filed a document in the same lawsuit on Monday seeking an “urgent” court hearing.
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