Digital World Extends 6-Day Drop After Truth Social Threatens SEC Lawsuit

  • Digital World Acquisition was down 7% on Wednesday, extending its six-day decline to more than 30%.
  • The SPAC’s merger target, Truth Social, has threatened to sue the SEC over political bias delaying the proposed merger with Digital World.
  • But Digital World has failed to attract the 65% of shareholders needed to approve the business combination.

Digital World Acquisition saw its stock price plunge as much as 7% on Wednesday, extending its six-day decline to a whopping 30% as the company struggles to close its proposed merger with Truth Social.

Since Digital World first announced its deal with Truth Social last year, the SPAC has fallen 90% from its all-time high of $175 a share. The most recent decline has been compounded by Digital World’s inability to complete the merger with Truth Social before the deadline.

But Truth Social believes the SEC is responsible for the delayed deal with the SPAC, according to a regulatory filing Wednesday.

“The SEC has suspended review of our proposed merger with DWAC for failing to act despite DWAC filing its registration statement more than four months ago. This unforgivable impediment, which directly contradicts the SEC’s stated mission , hurts investors and many just follow the rules and try to expand a successful business,” said Truth Social.

“In light of the apparent conflicts of interest among SEC officials and clear indications of political bias, TMTG is now investigating legal action against the SEC. Despite the increasing armament and politicization of government agencies, Truth Social will continue its expansion plans, supported by the unprecedented levels of user engagement on the platform,” the company added.

One factor holding back the deal not mentioned in Truth Social’s statement is the failure of Digital World to attract the 65% of shareholders needed to approve the business combination. A first shareholder vote was not passed earlier this month and the vote has since been postponed to mid-October in an effort to gather more votes.

With continued uncertainty that Digital World will be able to receive the necessary number of votes by mid-October, the SPAC’s sponsor has deposited approximately $3 million to extend the potential deal deadline to December 8.

But if a deal can’t be done, like many SPACs today, Digital World could be forced to liquidate and repay the money it raised from investors.