Losses Triple at Trump Media’s Merger Partner

The losses continue to mount for the preferred merger partner of Trump Media and Technology Group, the parent of former president Donald Trump’s Truth Social platform. 

Digital World Acquisition Corp, the shell company that is seeking to merge with Trump Media, on Wednesday reported a loss of $12.2 million, or 33 cents a share for the third quarter ended September 30, more than triple the $3.8 million, or 10 cents per share that it reported in the year ago quarter.

It also posted a nine-month loss of $20 million, or 54 cents a share, about double the $10.1 million, or 27 cents per share loss for the same nine-month period last year.

The company went public in September 2021 and shortly thereafter announced that it planned to merge with Trump Media (or TMTG), which owns Truth Social, a potential competitor to X, the former Twitter, and other sites. The proposed combination has been on hold as the government has investigated whether Digital World violated securities laws.

Digital World is a special purpose acquisition company, or SPAC, which is a company set up for the sole purpose of raising money to buy a privately owned company or other business. It's a faster way for a company to go public compared to a traditional initial public offering and with less regulatory scrutiny. 

Digital World CEO Eric Swider told The Messenger that SPACs typically don't have any income since they aren't operating companies.

"By nature the losses grow," he said in an email, responding to a request for comment. "Why don’t you try being unique and write an article about our company that isn’t some half fabricated hit piece and actually write an intellectual piece." 

The losses are only the latest downbeat news from Digital World. Last week, the company reported a loss of $9.1 million, or 24 cents per share for the second quarter ended June 30, triple its loss of $3.1 million, or eight cents per share, in the year ago quarter, largely due to a $10 million hit related to a regulatory settlement.

For the six-month period, Digital World notched a loss of $7.8 million, or 21 cents per share, versus a loss of $6.3 million, or 17 cents per share for the comparable period last year.

More importantly, in the same Securities and Exchange Commission filing last week, Digital World disclosed that both it and Trump Media, have both been put on notice by their accounting firms that it is doubtful either of them can continue to operate.

Both companies, according to that Digital World document, were informed by their respective accounting firms that they questioned whether either of them could continue as a "going concern," legal language that indicates substantial doubt the company will be able to survive over the next 12 months.

The Digital World filing last week stated, “TMTG’s independent registered public accounting firm has indicated that TMTG’s financial condition raises substantial doubts as to its ability to continue as a going concern.” Trump Media’s accounting firm is Colorado-based BF Borgers CPA PC.

The filing also stated that Digital World’s own accounting firm, Adeptus Partners, has expressed its doubt about  that company’s ability to continue as a business entity since it will cease operations and liquidate if it is unable to complete its merger with Trump Media by Sept. 8, 2024.

In the same filing, Digital World disclosed that Trump Media has posted a $22.8 million loss for the quarter ended June 30, compared with a profit of $77.1 million in the year-ago quarter. 

For the 12 months ended last December, TMTG posted a profit of $50.5 million versus a loss of $59.1 million for the 2021 calendar year. 

Wednesday’s financial filing for Digital World reiterated the doubts about its ability to remain in business if it can’t complete the merger with Trump Media by next September, adding that it is uncertain as to whether it can consummate the deal by that date. If it fails to do so, Digital World will be forced to liquidate.

“The Company lacks the financial resources it needs to sustain operations for a reasonable period of time,” the company said.  “As a result, these factors raise substantial doubt about the Company’s ability to continue as a going concern.”

The company’s stockholder deficit rose sharply to $59.5 million on September 30 from $32 million on December 31 of 2022. Negative shareholder equity is often a warning for investors because it signals that a company owes more than it owns.  

Digital World has stumbled repeatedly over regulatory and other matters since its stock market debut.

In March, the company fired CEO Patrick Orlando, citing “unprecedented headwinds” in its business.

In June, the Securities and Exchange Commission charged a Digital World board member, Bruce Garelick, and two others with insider trading on advance knowledge of the company’s proposed merger with TMTG.

In  July, Digital World settled fraud charges brought by the SEC with regard to material misstatements in its filings and agreed to pay $18 million if the merger with Trump Media were to be consummated, as well as to revise its earlier filings. 

Last month, Digital World said its financial statements for 2021 should not be relied upon after its audit committee concluded that they contained “material weaknesses,” including errors related to the accounting of certain expenses. 

Trump Media’s chairman is former President Donald Trump and its CEO is Devin Nunes, a former California Representative and longtime supporter of the former president.