As filed with the U.S. Securities and Exchange Commission on May 16, 2022.

Registration No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Digital World Acquisition Corp.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   6770   85-4293042

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

(I.R.S. Employer

Identification No.)

78 SW 7th Street

Miami, Florida 33130

(305) 735-1517

(Address, including zip code, and telephone number, including area code, of  registrant’s principal executive offices)

Patrick Orlando

Chief Executive Officer

Digital World Acquisition Corp.

78 SW 7th Street

Miami, Florida 33130

(305) 735-1517

(Name, address, including zip code, and telephone number, including area code,  of agent for service)

 

 

Copies to:

 

Barry I. Grossman, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, New York 10105-0302
(212) 370-1300
 

John F. Haley, Esq.

Jonathan H. Talcott, Esq.

Andrew M. Tucker, Esq.

Nelson Mullins Riley & Scarborough LLP

2 South Biscayne Blvd., 21st Floor

Miami, Florida 33131

(305) 373-9400

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective and after all conditions under the Merger Agreement to consummate the proposed merger are satisfied or waived.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box:  ☐

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated      Smaller reporting company  
     Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  ☐

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

Exchange Act Rule 13e-4(i) (Cross-Border  Issuer Tender Offer)  ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer)  ☐

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


The information in this preliminary proxy statement/prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary proxy statement/prospectus is not an offer to sell these securities and does not constitute the solicitation of offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY — SUBJECT TO COMPLETION, DATED MAY 16, 2022

PROXY STATEMENT OF

DIGITAL WORLD ACQUISITION CORP.

PROSPECTUS FOR UP TO

88,948,023 SHARES OF COMMON STOCK

 

 

To the Stockholders of Digital World Acquisition Corp.:

We are pleased to provide this proxy statement/prospectus relating to the proposed merger (the “Merger”) of DWAC Merger Sub Inc., a Delaware corporation (“Merger Sub”) and a wholly-owned subsidiary of Digital World Acquisition Corp., a Delaware corporation (“Digital World”), with and into Trump Media & Technology Group Corp., a Delaware corporation (“TMTG”), pursuant to an Agreement and Plan of Merger, dated as of October 20, 2021 (as amended by the First Amendment to Agreement and Plan of Merger, dated May 11, 2022, and as it may be further amended or supplemented from time to time, the “Merger Agreement”), by and among Digital World, Merger Sub, TMTG, ARC Global Investments II, LLC, a Delaware limited liability company, in the capacity as the representative of the stockholders of Digital World, and TMTG’s General Counsel in his capacity as the representative of the stockholders of TMTG. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Merger Agreement. If (i) the Merger Agreement is adopted and the Merger and the other transactions contemplated thereby (collectively, the “Business Combination”) are approved by Digital World’s and TMTG’s stockholders, and (ii) the Business Combination is subsequently completed, (a) the Merger Sub will merge with and into TMTG with TMTG surviving the Merger as a wholly-owned subsidiary of Digital World, (b) all of the issued and outstanding capital stock of TMTG immediately prior to the effective time of the Merger (the “Effective Time”) (other than those properly exercising any applicable appraisal rights under Delaware law) will automatically be cancelled and shall cease to exist, in exchange for the right to receive pro rata shares of the Merger Consideration (as defined below), (c) each outstanding option to acquire shares of TMTG common stock (whether vested or unvested) will be assumed by Digital World and automatically converted into an option to acquire shares of Digital World common stock, with its price and number of shares equitably adjusted based on the conversion ratio of the shares of TMTG common stock into the Merger Consideration, and (d) each outstanding restricted stock unit of TMTG shall be converted into a restricted stock unit relating to shares of Digital World common stock, as provided in the Merger Agreement and as more particularly described in the notice that follows this page and elsewhere in this proxy statement/prospectus. Upon the consummation of the Business Combination, Digital World will change its name to “Trump Media & Technology Group Corp.”

The Merger Agreement provides that the aggregate merger consideration to be paid to TMTG securityholders as of immediately prior to the Effective Time (“TMTG securityholders”) will be an amount equal to $875,000,000, subject to adjustments for TMTG’s closing debt, net of cash and unpaid transaction expenses (the “Merger Consideration”), plus the additional contingent right to receive the Earnout Shares (as defined below) after the closing of the Business Combination, provided that it shall exclude any additional shares issuable upon conversion of certain TMTG convertible notes (the “Closing”), as described below. The Merger Consideration to be paid to TMTG securityholders will be paid solely by the delivery of new shares of Digital World common stock, with each valued at the price per share at which each share of Digital World Class A common stock is redeemed or converted pursuant to the redemption by Digital World of its public stockholders in connection with the Business Combination, as required by Digital World’s amended and restated certificate of incorporation and by-laws and Digital World’s initial public offering prospectus. See “Summary of the Proxy Statement/Prospectus — The Business Combination Proposal (Proposal 1) — Merger Consideration” for additional details.

In addition to the Merger Consideration set forth above, the TMTG securityholders will also have a contingent right to receive up to an aggregate of an additional 40,000,000 shares of Digital World common stock (the “Earnout Shares”) after the Closing based on the price performance of the Digital World common stock during the three (3) year period following the Closing (the “Earnout Period”). The Earnout Shares shall be earned and payable during the Earnout Period as follows:

 

   

if the dollar volume-weighted average price (“VWAP”) of Digital World common stock equals or exceeds $15.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG securityholders an additional 15,000,000 Earnout Shares;


   

if the VWAP of Digital World common stock equals or exceeds $20.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG securityholders an additional 15,000,000 Earnout Shares; and

 

   

if the VWAP of Digital World common stock equals or exceeds $30.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG securityholders an additional 10,000,000 Earnout Shares.

Digital World’s units, Digital World Class A common stock and Digital World’s public warrants are publicly traded on the Nasdaq Global Market (“Nasdaq”). We will apply to list the new Digital World common stock and public warrants on Nasdaq under the symbols “TMTG” and “TMTGW,” respectively, upon the Closing. Upon the Closing, Digital World’s units will be separated into their component securities and will cease to be listed on Nasdaq.

Digital World will hold a virtual special meeting of its stockholders in order to obtain the stockholder approvals necessary to complete the Business Combination. At the Digital World Special Meeting, which will be held exclusively via a live audio webcast at Digital World Special Meeting, on __________, 2022 at 10:00 a.m., Eastern Time, unless postponed or adjourned to a later date, Digital World will ask its stockholders to adopt the Merger Agreement and the related transactions thereby approving the Business Combination and to approve the other proposals described in this proxy statement/prospectus. To participate in the virtual meeting, a Digital World stockholder of record will need the 12-digit control number included on such stockholder’s proxy card or instructions that accompanied such stockholder’s proxy materials. If a Digital World stockholder holds his, her or its shares in “street name,” which means his, her or its shares are held of record by a broker, bank or other nominee, such Digital World stockholder should contact his, her or its broker, bank or nominee to ensure that votes related to the shares he, she or it beneficially owns are properly counted. In this regard, such Digital World stockholder must provide the record holder of his, her or its shares with instructions on how to vote his, her or its shares or, if such Digital World stockholder wishes to attend the special meeting of Digital World and vote in person, obtain a proxy from his, her or its broker, bank or nominee. The live audio webcast of the Digital World special meeting will begin promptly at 10:00 a.m., Eastern Time. Digital World stockholders are encouraged to access the special meeting of Digital World prior to the start time. If you encounter any difficulties accessing the virtual meeting or during the meeting time, please call the technical support number that will be posted on the virtual meeting login page.

If you have any questions or need assistance with voting your Digital World common stock, please contact ________, Digital World’s proxy solicitor, by calling ________, or banks and brokers can call ________, or by emailing ________. This proxy statement/prospectus and the notice of the special meeting relating to the Business Combination will be available at https://www.cstproxy.com/dwacspac/2022.

This proxy statement/prospectus provides you with detailed information about the Business Combination and other matters to be considered at the special meeting of Digital World’s stockholders. We encourage you to carefully read this entire proxy statement/prospectus, including all annexes attached hereto.

We urge you to read the accompanying proxy statement/ prospectus, including the financial statements and annexes and other documents referred to therein, carefully and in their entirety. IN PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER “RISK FACTORS” BEGINNING ON PAGE 52 OF THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS.

NEITHER THE U.S. SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES REGULATORY AGENCY HAS APPROVED OR DISAPPROVED THE TRANSACTIONS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS OR ANY OF THE SECURITIES TO BE ISSUED IN THE BUSINESS COMBINATION, PASSED UPON THE MERITS OR FAIRNESS OF THE BUSINESS COMBINATION OR RELATED TRANSACTIONS OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE DISCLOSURE IN THE ACCOMPANYING PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY CONSTITUTES A CRIMINAL OFFENSE.

 

 


This proxy statement/prospectus is dated __________, 2022, and is first being mailed to stockholders of Digital World on or about __________, 2022.

Very truly yours,

Patrick Orlando

Chief Executive Officer

Digital World Acquisition Corp.


DIGITAL WORLD ACQUISITION CORP.

78 SW 7th Street

Miami, Florida 33130

TO THE STOCKHOLDERS OF DIGITAL WORLD ACQUISITION CORP.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the “Digital World Special Meeting”) of Digital World Acquisition Corp., a Delaware corporation (“Digital World”), will be held virtually at 10:00 a.m., Eastern Time, on __________, 2022. Details on how to participate are more fully described in this proxy statement/prospectus. At the Digital World Special Meeting, Digital World stockholders will be asked to consider and vote upon the following proposals (collectively, the “Proposals”).

You are cordially invited to attend the Stockholders Meeting, which will be held for the following purposes:

 

  (1)

The Business Combination Proposal (Proposal 1) — To approve and adopt the Agreement and Plan of Merger, dated as of October 20, 2021 (as amended by the First Amendment to the Agreement, and as it may further be amended or supplemented from time to time, the “Merger Agreement”), by and among Digital World, DWAC Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of Digital World (“Merger Sub”), Trump Media & Technology Group Corp., a Delaware corporation (“TMTG”), ARC Global Investments II, LLC, a Delaware limited liability company, in the capacity as the representative of the stockholders of Digital World, and TMTG’s General Counsel in the capacity as the representative of the stockholders of TMTG, and approve the transactions contemplated thereby, including the merger of Merger Sub with and into TMTG, with TMTG continuing as the surviving corporation and as a wholly-owned subsidiary of Digital World (the “Merger” and, together with the other transactions contemplated by the Merger Agreement, the “Business Combination”). Subject to the terms and conditions set forth in the Merger Agreement, among other matters, at the effective time of the Merger (the “Effective Time”):

 

  (a)

the outstanding shares of Class A common stock, par value $0.0001 per share, of Digital World (“Digital World Class A common stock”), including any shares of Class B common stock, par value $0.0001 per share, of Digital World (“Digital World Class B common stock”, and together with the Digital World Class A common stock, the “Digital World common stock”) that are converted into Digital World Class A common stock in accordance with Digital World’s amended and restated certificate of incorporation (the “Digital World Charter”), will be redesignated as common stock, par value $0.0001 per share, of Trump Media & Technology Group Corp. (which will be the new name of Digital World after the Closing, as described below, “New Digital World”) (referred to herein as “New Digital World common stock”);

 

  (b)

As consideration for the Merger, the TMTG securityholders as of immediately prior to the Effective Time (“TMTG securityholders”), shall be entitled to receive from Digital World, a number of shares of New Digital World common stock in an amount equal to $875,000,000, subject to adjustments for TMTG’s closing debt, net of cash, and unpaid transaction expenses (the “Merger Consideration”), plus the additional contingent right to receive the Earnout Shares (as defined below) after the closing of the Business Combination, provided that it shall exclude any additional shares issuable upon conversion of certain TMTG convertible notes (the “Closing”), as described below, and upon the Merger (i) all of the issued and outstanding capital stock of TMTG immediately prior to the Effective Time (other than those properly exercising any applicable appraisal rights under Delaware law) will automatically be cancelled and shall cease to exist, in exchange for the right to receive pro rata shares of the aggregate Merger Consideration to be paid to TMTG stockholders as of immediately prior to the Effective Time (“TMTG stockholders”), (ii) each outstanding option to acquire shares of TMTG common stock (whether vested or unvested) will be assumed by Digital World and automatically converted into an option to acquire shares of New Digital World common stock, with its price and number of shares equitably adjusted based on the conversion ratio of the shares of TMTG common stock into the Merger Consideration, and (iii) each outstanding restricted stock unit of TMTG shall be converted into a

 

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  restricted stock unit relating to shares of New Digital World common stock, as provided in the Merger Agreement and as more particularly described in the notice that follows this page and elsewhere in this proxy statement/prospectus; and

 

  (c)

the TMTG stockholders will also have a contingent right to receive up to an aggregate of an additional 40,000,000 shares of New Digital World common stock (the “Earnout Shares”) after the Closing based on the price performance of the New Digital World common stock during the three (3) year period following the Closing (the “Earnout Period”). The Earnout Shares shall be earned and payable during the Earnout Period as follows:

 

   

if the dollar volume-weighted average price (“VWAP”) of New Digital World common stock equals or exceeds $15.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an additional 15,000,000 Earnout Shares;

 

   

if the VWAP of New Digital World common stock equals or exceeds $20.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an additional 15,000,000 Earnout Shares; and

 

   

if the VWAP of New Digital World common stock equals or exceeds $30.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholder an additional 10,000,000 Earnout Shares.

We refer to this proposal as the “Business Combination Proposal.” A copy of the Merger Agreement and the related agreements to be entered into pursuant to the Merger Agreement are attached to this proxy statement/prospectus as Annex A.

 

  (2)

Charter Amendment Proposals (Proposals 2 through 6) — To approve and adopt an amendment and restatement to the amended and restated of certificate of incorporation of Digital World (the “Digital World Charter”), as set out in the draft second amended and restated version of Digital World Charter appended to this proxy statement/prospectus as Annex B (the “Amended Charter”), for the following amendments (collectively, the “Charter Amendment Proposals”):

 

  (A)

Name Change – To provide that the name of Digital World shall be changed to “Trump Media & Technology Group Corp.” (Proposal 2);

 

  (B)

Board Structure and Composition – To provide for the structure of the board of directors of Digital World (the “Board”) immediately after the consummation of the Business Combination (the “Closing”), split into three classes of as even size as practicable, Class I, II, and III, each to serve a term of three (3) years, except for the initial term, for which the Class I directors will be up for reelection at the first annual meeting of stockholders occurring after the Closing, and for which the Class II directors will be up for reelection at the second annual meeting of stockholders occurring after the Closing. Directors will not be able to be removed during their term except for cause and then only by the affirmative vote of the holders of not less than two thirds (2/3) of the outstanding shares of capital stock then entitled to vote at an election of directors. The size of the Board shall be determined by resolution of the Board but will initially be seven (7) (Proposal 3);

 

  (C)

Amendment of Blank Check Provisions – To remove and change certain provisions in the Digital World Charter related to Digital World’s status as a special purpose acquisition company, including but not limited to the deletion of Article IX of the Digital World Charter in its entirety (Proposal 4);

 

  (D)

The Authorized Share Charter Amendment – To increase the number of authorized shares of common stock and preferred stock to accommodate the shares to be issued in the PIPE Investment and upon conversion of the preferred stock issued in the PIPE Investment (Proposal 5); and

 

  (E)

Amendment and Restatement of the Digital World Charter – Conditioned upon the approval of Proposals 2 through 4, to approve the proposed Amended Charter in the form attached as Annex B

 

2


  hereto, which includes the approval of all other changes in the proposed Amended Charter in connection with replacing the existing Digital World Charter with the proposed Amended Charter as of the Effective Time (Proposal 6).

 

  (3)

The Director Election Proposal (Proposal 7) — To consider and vote upon a proposal to elect seven (7) directors to serve on the board of directors of New Digital World effective from the consummation of the Business Combination until the 2023 annual meeting of stockholders and until their respective successors are duly elected and qualified (the “Director Election Proposal”);

 

  (4)

The Incentive Plan Proposal (Proposal 8) To consider and vote upon a proposal to adopt the Trump Media & Technology Group Corp. Equity Incentive Plan (the “Equity Incentive Plan”), a copy of which is attached to this proxy statement/prospectus as Annex C and the issuance of common stock equal to 7.5% of the fully diluted, and as converted, amount of New Digital World common stock to be outstanding immediately following consummation of the business combination, or                  shares of common stock as equity awards in accordance with the Equity Incentive Plan, if such plan is approved in accordance with the Incentive Plan Proposal (the “Incentive Plan Proposal”);

 

  (5)

The Nasdaq Proposal (Proposal 9) — To consider and vote upon a proposal to approve, for purposes of complying with Nasdaq Listing Rule 5635, (a) the issuance of 85,784,314 newly issued shares of common stock in the Business Combination, which amount will be determined as described in more detail in the accompanying proxy statement/prospectus, (b) the issuance of up to 29,761,905 shares of common stock in connection with the PIPE Investment, subject to adjustment as described in more detail in the accompanying proxy statement/prospectus, (c) the issuance of up to _______ shares of common stock underlying Working Capital Units issuable upon conversion of any convertible notes of Digital World that may be issued to Digital World’s sponsor or its affiliates and (d) the issuance of up to _______ shares of common stock issuable upon conversion after the Closing of outstanding convertible notes of TMTG in connection with the consummation of the Business Combination (the “Nasdaq Proposal”); and

 

  (6)

The Adjournment Proposal (Proposal 10) — To consider and vote upon a proposal to adjourn the Digital World Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Digital World Special Meeting, there are not sufficient votes to approve the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal, or the Nasdaq Proposal. We refer to this proposal as the “Adjournment Proposal.

Only holders of record of Digital World common stock at the close of business on __________, 2022 (the “Record Date”) are entitled to notice of the Digital World Special Meeting and to vote at the Digital World Special Meeting and any adjournments or postponements of the Digital World Special Meeting. A complete list of Digital World stockholders of record entitled to vote at the Digital World Special Meeting will be available for ten days before the Digital World Special Meeting at the principal executive offices of Digital World for inspection by stockholders during ordinary business hours for any purpose germane to the Digital World Special Meeting.

Pursuant to the Digital World Charter, Digital World is providing Digital World public stockholders with the opportunity to redeem, upon the closing of the Business Combination, shares of Digital World Class A common stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit (as of two business days prior to the closing of the Business Combination) in the trust account of Digital World (the “Trust Account”) that holds the proceeds (including interest but less taxes payable) of the Digital World initial public offering (the “Digital World IPO”), including over-allotment securities issued to Digital World’s underwriters after the Digital World IPO. As of the Record Date, based on funds in the Trust Account of $_______ as of such date, the pro rata portion of the funds available in the Trust Account for the redemption of public shares of Digital World Class A common stock was approximately $_________ per share. Digital World public stockholders are not required to affirmatively vote for or against the Business Combination in order to redeem their shares of common stock for cash. This means that public stockholders who hold shares of Digital World Class A common stock on or before ___________, 2022 (two (2) business days before the Digital World

 

3


Special Meeting) will be eligible to elect to have their shares of Digital World Class A common stock redeemed for cash in connection with the Digital World Special Meeting, whether or not they are holders as of the Record Date, and whether or not such shares are voted at the Digital World Special Meeting. A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined under Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), will be restricted from redeeming in the aggregate his, her or its shares or, if part of such a group, the group’s shares, with respect to more than 15% of the shares of Digital World common stock included in the units of Digital World sold in the Digital World IPO (including over-allotment securities sold to Digital World’s underwriters after the Digital World IPO) without the prior consent of Digital World. Holders of Digital World’s outstanding public warrants and units do not have redemption rights with respect to such securities in connection with the Business Combination. Holders of outstanding Digital World units must separate the underlying shares of Digital World Class A common stock and public warrants prior to exercising redemption rights with respect to the public Digital World Class A common stock. ARC Global Investments II LLC, the sponsor of Digital World (the “Sponsor”), and Digital World’s officers and directors have agreed to waive their redemption rights with respect to any shares of Digital World common stock they may hold in connection with the consummation of the Business Combination; the anchor investors of Digital World have agreed to waive their redemption rights with respect to any shares of Digital World Class B common stock held by them in connection with the consummation of the Business Combination; holders of Digital World representative shares have agreed to waive their redemption rights with respect to such shares in connection with the consummation of the Business Combination; and all such shares will be excluded from the pro rata calculation used to determine the per-share redemption price. Currently, the Sponsor and our directors and officers beneficially own 17.9% of the issued and outstanding shares of Digital World common stock and anchor investors beneficially own an aggregate of 23.6% of the issued and outstanding shares of Digital World Class B common stock. The Sponsor and Digital World’s directors and officers have agreed to vote any shares of Digital World common stock owned by them in favor of the Business Combination, which would include Business Combination Proposal and the other Proposals. The anchor investors of Digital World have also agreed to vote any shares of Digital World Class B common stock held by them in favor of the Business Combination.

The approval of the Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal requires the affirmative vote of a majority of the issued and outstanding shares of Digital World common stock as of the Record Date cast by the stockholders represented in person or by proxy and entitled to vote thereon at the Digital World Special Meeting. The approval of the Charter Amendment Proposals requires the affirmative vote of a majority of the issued and outstanding shares of Digital World common stock as of the Record Date entitled to vote thereon. The approval of the Director Election Proposal requires a plurality vote of the shares of Digital World common stock cast by the stockholders represented in person or by proxy and entitled to vote thereon at the Digital World Special Meeting. If the Business Combination Proposal is not approved, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal will not be presented to the Digital World stockholders for a vote. The approval of the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal are preconditions to the consummation of the Business Combination. The board of directors of Digital World has already approved the Business Combination.

As of the Record Date, there was approximately $___________ in the Trust Account. Any redemption of shares of Digital World Class A common stock by Digital World’s public stockholders will decrease the amount in the Trust Account. In accordance with the Digital World Charter, net tangible assets must be maintained at a minimum of $5,000,001 immediately prior to or upon consummation of the Business Combination.

Your attention is directed to this proxy statement/prospectus (including the annexes hereto) for a more complete description of the proposed Business Combination and related transactions and each of the Proposals. We encourage you to read this proxy statement/prospectus carefully. If you have any questions or need assistance voting your shares, please call us at (305) 735-1517.

 

By Order of the Board of Directors of Digital World

Acquisition Corp.

 

4


IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR SHARES WILL BE VOTED IN FAVOR OF EACH OF THE PROPOSALS.

TO EXERCISE YOUR REDEMPTION RIGHTS, YOU MUST, PRIOR TO 5:00 P.M., EASTERN TIME, ON ___________, 2022 (TWO (2) BUSINESS DAYS BEFORE THE DIGITAL WORLD SPECIAL MEETING), TENDER YOUR SHARES PHYSICALLY OR ELECTRONICALLY AND SUBMIT A REQUEST IN WRITING THAT WE REDEEM YOUR PUBLIC SHARES FOR CASH TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY. PLEASE ALSO AFFIRMATIVELY CERTIFY IN YOUR REQUEST TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY FOR REDEMPTION IF YOU “ARE” OR “ARE NOT” ACTING IN CONCERT OR AS A “GROUP” (AS DEFINED IN SECTION 13(D)(3) OF THE EXCHANGE ACT) WITH ANY OTHER STOCKHOLDER WITH RESPECT TO SHARES OF COMMON STOCK. YOU MUST ACT IN ACCORDANCE WITH THE PROCEDURES AND DEADLINES DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS. IF THE BUSINESS COMBINATION IS NOT CONSUMMATED, THEN THE PUBLIC SHARES WILL NOT BE REDEEMED FOR CASH. IF YOU HOLD THE SHARES IN STREET NAME, YOU WILL NEED TO INSTRUCT THE ACCOUNT EXECUTIVE AT YOUR BANK OR BROKER TO WITHDRAW THE SHARES FROM YOUR ACCOUNT IN ORDER TO EXERCISE YOUR REDEMPTION RIGHTS. SEE “THE DIGITAL WORLD SPECIAL MEETING — REDEMPTION RIGHTS” IN THIS PROXY STATEMENT/PROSPECTUS FOR MORE SPECIFIC INSTRUCTIONS.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT DIGITAL WORLD AND TMTG THAT IS NOT INCLUDED IN OR DELIVERED HEREWITH. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE TO STOCKHOLDERS OF DIGITAL WORLD UPON WRITTEN OR ORAL REQUEST. IF YOU WOULD LIKE TO MAKE SUCH REQUEST, YOU SHOULD CONTACT DIGITAL WORLD IN WRITING AT PATRICK ORLANDO, DIGITAL WORLD ACQUISITION CORP., 78 SW 7TH STREET, MIAMI, FLORIDA 33130 OR BY TELEPHONE AT (305) 735-1517. TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THE INFORMATION NO LATER THAN ____________, 2022, WHICH IS FIVE BUSINESS DAYS BEFORE THE DATE YOU MUST MAKE YOUR INVESTMENT DECISION.

 

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TABLE OF CONTENTS

 

     Page  

ABOUT THIS DOCUMENT

     1  

MARKET AND INDUSTRY DATA

     1  

TRADEMARKS

     1  

FREQUENTLY USED TERMS

     2  

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

     6  

QUESTIONS AND ANSWERS

     9  

SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

     27  

SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF DIGITAL WORLD

     45  

SELECTED HISTORICAL FINANCIAL INFORMATION OF TMTG

     46  

SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     47  

UNAUDITED HISTORICAL COMPARATIVE AND PRO FORMA COMBINED PER SHARE

     49  

DIVIDENDS ON SECURITIES

     51  

RISK FACTORS

     52  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     119  

INFORMATION ABOUT THE PARTIES TO THE BUSINESS COMBINATION

     127  

THE DIGITAL WORLD SPECIAL MEETING

     129  

THE BUSINESS COMBINATION PROPOSAL (PROPOSAL 1)

     137  

THE CHARTER AMENDMENT PROPOSALS (PROPOSALS 2 THROUGH 6)

     172  

THE DIRECTOR ELECTION PROPOSAL (PROPOSAL 7)

     174  

THE INCENTIVE PLAN PROPOSAL (PROPOSAL 8)

     176  

THE NASDAQ PROPOSAL (PROPOSAL 9)

     182  

THE ADJOURNMENT PROPOSAL (PROPOSAL 10)

     184  

INFORMATION ABOUT DIGITAL WORLD

     185  

DIGITAL WORLD’S MANAGEMENT

     189  

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF DIGITAL WORLD

     196  

INFORMATION ABOUT TMTG

     206  

EXECUTIVE OFFICERS AND DIRECTORS OF TMTG

     214  

DESCRIPTION OF SECURITIES OF NEW DIGITAL WORLD

     217  

SECURITIES ACT RESTRICTIONS ON RESALE OF COMMON STOCK

     229  

COMPARISON OF STOCKHOLDER RIGHTS

     230  

BENEFICIAL OWNERSHIP OF SECURITIES

     241  

MANAGEMENT AFTER THE BUSINESS COMBINATION

     244  

EXECUTIVE AND DIRECTOR COMPENSATION OF TMTG

     250  

CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS

     252  

APPRAISAL RIGHTS

     256  

LEGAL MATTERS

     256  

EXPERTS

     256  

TRANSFER AGENT AND REGISTRAR

     256  

DELIVERY OF DOCUMENTS TO STOCKHOLDERS

     257  

SUBMISSION OF STOCKHOLDER PROPOSALS

     257  

FUTURE STOCKHOLDER PROPOSALS

     257  

STOCKHOLDER COMMUNICATIONS

     258  

WHERE YOU CAN FIND MORE INFORMATION

     259  

 

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INDEX TO FINANCIAL STATEMENTS

     F-1  

ANNEX A AGREEMENT AND PLAN OF MERGER

     A-1  

ANNEX B SECOND AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

     B-1  

ANNEX C TRUMP MEDIA & TECHNOLOGY GROUP CORP. EQUITY INCENTIVE PLAN

     C-1  

 

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ABOUT THIS DOCUMENT

This document, which forms part of a registration statement on Form S-4 filed with the SEC by Digital World, constitutes a prospectus of Digital World under the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of common stock of Digital World to be issued to TMTG’s securityholders under the Merger Agreement. This document also constitutes a notice of meeting and a proxy statement of Digital World under Section 14(a) of the Exchange Act.

You should rely only on the information contained in, or incorporated by reference into, this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this proxy statement/prospectus. This proxy statement/prospectus is dated as of the date set forth on the cover hereof. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. You should not assume that the information incorporated by reference into this proxy statement/prospectus is accurate as of any date other than the date of such incorporated document. Neither the mailing of this proxy statement/prospectus to Digital World stockholders nor the issuance by Digital World of its common stock in connection with the Business Combination will create any implication to the contrary.

Information contained in this proxy statement/prospectus regarding Digital World and its business, operations, management and other matters has been provided by Digital World and information contained in this proxy statement/prospectus regarding TMTG and its business, operations, management and other matters has been provided by TMTG.

This proxy statement/prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities, or the solicitation of a proxy or consent, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction.

MARKET AND INDUSTRY DATA

This proxy statement/prospectus contains information concerning the market and industry in which TMTG conducts its business. TMTG operates in an industry in which it is difficult to obtain precise industry and market information. TMTG has obtained market and industry data in this proxy statement/prospectus from industry publications and from surveys or studies conducted by third parties that it believes to be reliable. TMTG cannot assure you of the accuracy and completeness of such information, and it has not independently verified the market and industry data contained in this proxy statement/prospectus or the underlying assumptions relied on therein. As a result, you should be aware that it is possible that any such market, industry and other similar data may not in fact be reliable. While TMTG is not aware of any misstatements regarding any industry data presented in this proxy statement/prospectus, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the section entitled “Risk Factors” in this proxy statement/prospectus.

TRADEMARKS

This proxy statement/prospectus references the trademark and service mark applications of TMTG. Such applications include “TRUTH SOCIAL,” which was filed in the name of Trump Media Group Corp. (TMTG’s former name); and “TMTG” “TMTG+” “POST A TRUTH” “FOLLOW THE TRUTH” “TRUTHING” “RETRUTH” “TRUTHSOCIAL” “TRUTH SOCIAL,” and “TRUTHPLUS,” which were filed in the name of T Media Tech LLC (TMTG’s wholly owned subsidiary that was acquired in October 2021), if approved by the U.S. Patent and Trademark Office (“USPTO”) and registered with the USPTO will be protected under applicable intellectual property laws and are the property of TMTG or its subsidiaries. There can be no assurance these trademarks will be approved, and the name Truth Social has been challenged by an existing applicant. This proxy statement/prospectus also contains trademarks, service marks, trade names and copyrights of other companies, which are the property of their respective owners. Trademarks and service marks are collectively referred to herein as “Trademarks.”

 

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Solely for convenience, trademarks and trade names referred to in this proxy statement/prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names.

FREQUENTLY USED TERMS

Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” and “Digital World” refer to Digital World Acquisition Corp.

In this document:

Amended Charter” means the second amended and restated certificate of incorporation of Digital World to be adopted by Digital World pursuant to the Charter Amendment Proposals.

anchor investors” are to (i) accounts or funds managed by Radcliffe Capital Management, L.P., (ii) Meteora Capital Partners, LP (an affiliate of Glazer Capital LLC), (iii) Castle Creek Strategies (and sub-funds associated with Castle Creek), (iv) The K2 Principal Fund L.P., (v) Context Partners Master Fund LP, (vi) Boothbay Absolute Return Strategies, LP (or its affiliate Boothbay Diversified Alpha Master Fund LP, commonly controlled by Boothbay Fund Management LLC), (vii) investment funds and accounts managed by Shaolin Capital Management, LLC, (viii) Hudson Bay Master Fund Ltd. and/or its affiliates, (ix) Saba Capital Master Fund, Ltd., Saba Capital Master Fund II, Ltd., Saba Capital Master Fund III, LP and Saba Capital SPAC Opportunities, Ltd., (x) D. E. Shaw Valence Portfolios, L.L.C. and (xi) Yakira Capital Management, Inc. (none of which are affiliated with any member of Digital World management, the Sponsor or any other anchor investor), each of which entered into an investment agreement pursuant to which it expressed an interest to purchase up to 8.3% of the units sold in Digital World IPO.

Board” or “Digital World Board” means the board of directors of Digital World.

Borgers” means BF Borgers, TMTG’s independent registered public accounting firm.

Business Combination” means the Merger and the other transactions contemplated by the Merger Agreement.

Class A common stock” means the Class A common stock, par value $0.0001 per share, of Digital World.

Class B common stock” means the Class B common stock, par value $0.0001 per share, of Digital World.

Closing” means the closing of the Business Combination.

Code” means the Internal Revenue Code, as amended.

Combined Entity” or “New Digital World” means Digital World after giving effect to the Business Combination, and which will include TMTG and any other direct or indirect subsidiaries of Digital World to the extent reasonably applicable.

Common Stock” means any of the Class A common stock and the Class B common stock.

DGCL” means the General Corporation Law of the State of Delaware, as amended.

Digital World” means Digital World Acquisition Corp., a Delaware corporation, which will be renamed “Trump Media & Technology Group Corp.” in connection with the Closing.

 

2


Digital World Charter” or “Charter” means Digital World’s current amended and restated certificate of incorporation as filed with the Secretary of State of the State of Delaware on September 2, 2021.

Digital World IPO,” “IPO” or “Initial Public Offering” means Digital World’s initial public offering that was consummated on September 8, 2021.

Digital World IPO Prospectus” means the final prospectus of Digital World, dated as of September 2, 2021, and filed with the SEC pursuant to Rule 424(b) under the Securities Act on September 8, 2021 (File No. 333-256472).

Digital World Special Meeting” means the special meeting of the stockholders of Digital World, to be held virtually at 10:00 a.m., Eastern Time, on ____________, 2022.

Effective Time” means the effective time of the Merger in accordance with the Merger Agreement.

Equity Incentive Plan” means the Trump Media & Technology Group Corp. Equity Incentive Plan, as such may be amended, supplemented or modified from time to time, which shall be adopted by Digital World and approved in accordance with the Incentive Plan Proposal to be effective as of the Closing of the Business Combination.

Exchange Act” means the Securities Exchange Act of 1934, as amended.

Extension Units” means any units issued to the Sponsor or its affiliates or designees in connection with additional funds deposited by the Sponsor to the Trust Account to extend the period of time to consummate a Business Combination up to two times, each by an additional three months (for a total of up to 18 months to complete a Business Combination).

First Amendment to the Agreement” means the First Amendment to Agreement and Plan of Merger, dated May 11, 2022, by and among Digital World, Merger Sub, TMTG, the Sponsor in the capacity as the representative of Digital World, and TMTG’s General Counsel in the capacity as the representative of TMTG.

Founder Shares” means Class B common stock initially purchased by the Sponsor on January 20, 2021.

Initial Stockholders” means the Sponsor and any other holders of the Founder Shares prior to the Digital World IPO (or their permitted transferees), if any;

Marcum” means Marcum LLP, Digital World’s independent registered public accounting firm.

Merger” means the merger of Merger Sub with and into TMTG, with TMTG continuing as the surviving corporation and as a wholly-owned subsidiary of Digital World, in accordance with the terms of the Merger Agreement.

Merger Agreement” means the Agreement and Plan of Merger, dated October 20, 2021, as amended by the First Amendment to the Agreement, and as it may further be amended or supplemented from time to time, by and among Digital World, Merger Sub, TMTG, the Sponsor in the capacity as the representative of Digital World, and TMTG’s General Counsel in the capacity as the representative of TMTG.

Merger Sub” means DWAC Merger Sub Inc., a Delaware corporation and a wholly-owned subsidiary of Digital World.

New Digital World common stock” means the common stock, par value $0.0001 per share, of Digital World (which will be renamed Trump Media & Technology Group Corp.) following the Business Combination; such common stock was previously designated Class A common stock of Digital World, and New Digital World common stock will include any shares of Class B common stock all of which will be converted into Class A common stock in connection with the Closing pursuant to the Digital World Charter.

 

3


PIPE Investment” means that certain private placement in the aggregate amount of approximately $1,000,000,000, to be consummated concurrently with the TMTG Business Combination, pursuant to those certain securities purchase agreements (the “SPA”) with certain institutional investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase up to an aggregate of 1,000,000 shares of Digital World’s Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000 per share (the “PIPE”). The shares are initially convertible into 29,761,905 shares of common stock, subject to upward adjustment as described herein.

Placement Shares” means the shares of Digital World Class A common stock included within the Placement Units being purchased by the Sponsor in the Private Placement;

Placement Units” means 1,133,484 units issued to the Sponsor in the Private Placement (including the additional units purchased after the Digital World IPO in connection with the over-allotment securities issued to Digital World’s underwriters). Each Placement Unit consists of one Placement Share and one-half of one Placement Warrant.

Placement Warrant” means the warrants included within the Placement Units being purchased by the Sponsor in the Private Placement. Each Placement Warrant entitles the holder thereof to purchase one share of Digital World Class A common stock for $11.50 per share.

Private Placement” means the private placement consummated simultaneously with the Digital World IPO in which Digital World issued to the Sponsor the Placement Units.

Proposals” means the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal.

Public Shares” means shares of Class A common stock included in the Public Units and shares of Class A common stock underlying the Public Warrants.

Public Warrants” means warrants underlying the Units issued in the Digital World IPO. Each whole Public Warrant entitles the holder thereof to purchase one share of Class A common stock for $11.50 per share.

Public Units” means units issued in the Digital World IPO, including any over-allotment securities acquired by Digital World’s underwriters, consisting of one Public Share and one-half of one Public Warrant.

Redemption” means the right of the holders of Class A common stock to have their shares redeemed in accordance with the procedures set forth in this proxy statement/prospectus and the Digital World Charter.

Required Proposals” means the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal.

SEC” means the U.S. Securities and Exchange Commission.

Securities Act” means the Securities Act of 1933, as amended.

Sponsor” means ARC Global Investments II LLC.

TMTG” means Trump Media & Technology Group Corp., a Delaware corporation, and includes the surviving corporation after the Merger. References herein to TMTG will include its subsidiaries to the extent reasonably applicable.

TMTG 2022 Plan” means the Trump Media & Technology Group Corp. 2022 Equity Incentive Plan, adopted by TMTG following the date of Merger Agreement and prior to the Closing of the Business Combination.

 

4


TMTG Board” means the board of directors of TMTG.

TMTG common stock” means shares of common stock, par value $0.000001 per share, of TMTG.

TMTG Convertible Securities” means, collectively, any TMTG Options, TMTG RSUs, warrants or rights to subscribe for or purchase any capital stock of the TMTG or securities convertible into or exchangeable for, or that otherwise confer on the holder any right to acquire any capital stock of the TMTG.

TMTG Options” means, collectively, all outstanding options to purchase shares of TMTG common stock, whether or not exercisable and whether or not vested, immediately prior to the Effective Time under the TMTG 2022 Plan or otherwise.

TMTG RSUs” all outstanding restricted stock units with respect to shares of TMTG common stock, whether or not vested, immediately prior to the Effective Time under the TMTG 2022 Plan or otherwise.

TMTG securityholders” refers to holders of capital stock, options and other convertible securities of TMTG as of the time immediately before the Effective Time.

TMTG securities” means any of the TMTG common stock and any TMTG Convertible Securities.

TMTG stockholders” refers to holders of capital stock of TMTG as of the time immediately before the Effective Time.

Trust Account” means the trust account of Digital World, which holds the net proceeds of the Digital World IPO, including from over-allotment securities sold by Digital World’s underwriters, and the sale of the Placement Units, together with interest earned thereon, less amounts released to pay tax obligations and up to $100,000 for dissolution expenses, and amounts paid pursuant to redemptions.

U.S. GAAP” means generally accepted accounting principles in the United States.

Units” means any of the Public Units, Placement Units, the Working Capital Units (if any), and the Extension Units (if any).

Warrants” means any of the Public Warrants, the Placement Warrants and the warrants underlying the Working Capital Units (if any) and Extension Units (if any), excluding any warrants of TMTG.

Working Capital Units” means any units issued to the Sponsor or its affiliates or Digital World’s officers or directors in connection with any loans made by them to Digital World prior to the closing of Digital World’s initial business combination in accordance with the Digital World IPO Prospectus. As described in the Digital World IPO Prospectus, initially up to $1,500,000 of such loans could have been converted at the election of the applicable lender into units at a price of $10.00 per unit, which units would be identical to the Placement Units. The amount of such loans that can be converted to Working Capital Units has subsequently been increased to $30,000,000, The additional Working Capital Units beyond the Working Capital Units underlying the initial $1,500,000 in working capital loans as described in the Digital World’s IPO prospectus will only be issuable upon the approval of Digital Word’s stockholders.

 

5


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus (including the documents incorporated by reference herein) contains forward-looking statements regarding, among other things, the plans, strategies and prospects, both business and financial, of Digital World and TMTG. These statements are based on the beliefs and assumptions of the management of Digital World and TMTG. Although Digital World and TMTG believe that their respective plans, intentions and expectations reflected in or suggested by these forward-looking statements are reasonable, neither Digital World nor TMTG can assure you that either will achieve or realize these plans, intentions or expectations. Forward-looking statements are inherently subject to risks, uncertainties and assumptions. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” or similar expressions, but the absence of these words does not mean that a statement is not forward-looking. Neither Borgers, TMTG’s independent auditor, nor Marcum, Digital World’s independent auditor, has examined, compiled or otherwise applied procedures with respect to the accompanying forward-looking financial information presented herein and, accordingly, expresses no opinion or any other form of assurance on it. The report of Borgers included in this proxy statement/prospectus relates to historical financial information of TMTG, and the report of Marcum included in this proxy statement/prospectus relates to historical financial information of Digital World. Neither report extends to the forward-looking information and should not be read as if it does. Forward-looking statements contained in this proxy statement/prospectus include, but are not limited to, statements about:

 

   

the ability of Digital World and TMTG prior to the Business Combination to meet the Closing conditions to the Business Combination, including approval by stockholders of Digital World and TMTG of the Business Combination and related proposals, and the availability of at least $5,000,001 in net tangible assets, after giving effect to redemptions of public shares, if any;

 

   

the ability of the Combined Entity following the Business Combination, to realize the benefits from the Business Combination;

 

   

the ability of Digital World to complete the Business Combination;

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

   

the ability of Digital World and TMTG prior to the Business Combination, and the Combined Entity following the Business Combination, to obtain and/or maintain the listing of New Digital World common stock on Nasdaq following the Business Combination;

 

   

future financial performance following the Business Combination;

 

   

public securities’ potential liquidity and trading;

 

   

the use of proceeds not held in the Trust Account or available to Digital World from interest income on the Trust Account balance;

 

   

the impact from the outcome of any known and unknown litigation;

 

   

the ability of the Combined Entity to forecast and maintain an adequate rate of revenue growth and appropriately plan its expenses;

 

   

expectations regarding future expenditures of the Combined Entity following the Business Combination;

 

   

the future mix of revenue and effect on gross margins of the Combined Entity following the Business Combination;

 

6


   

the attraction and retention of qualified directors, officers, employees and key personnel of Digital World and TMTG prior to the Business Combination, and the Combined Entity following the Business Combination;

 

   

the ability of the Combined Entity to compete effectively in a competitive industry;

 

   

the ability to protect and enhance TMTG’s corporate reputation and brand;

 

   

expectations concerning the relationships and actions of TMTG and its affiliates with third parties;

 

   

the impact from future regulatory, judicial, and legislative changes in TMTG’s or the Combined Entity’s industry;

 

   

the ability to locate and acquire complementary products or product candidates and integrate those into TMTG’s or the Combined Entity’s business;

 

   

future arrangements with, or investments in, other entities or associations;

 

   

intense competition and competitive pressures from other companies in the industries in which the Combined Entity will operate; and

 

   

other factors detailed under the section entitled “Risk Factors.”

These forward-looking statements are based on information available as of the date of this proxy statement/prospectus, and current expectations, forecasts and assumptions, and involve a number of risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.

In addition, statements that Digital World or TMTG “believes” and similar statements reflect such party’s beliefs and opinions on the relevant subject. These statements are based upon information available to such party as of the date of this proxy statement/prospectus, and while such party believes such information forms a reasonable basis for such statements, such information may be limited or incomplete, and these statements should not be read to indicate that either Digital World or TMTG has conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should not place undue reliance on these forward-looking statements in deciding how to grant your proxy or instruct how your vote should be cast or vote your shares on the proposals set forth in this proxy statement/prospectus. As a result of a number of known and unknown risks and uncertainties, the actual results or performance of Digital World, TMTG and/or the Combined Entity may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause Digital World’s, TMTG’s or the Combined Entity’s actual results to differ include:

 

   

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

   

the outcome of any legal or regulatory proceedings that have been, or may be, instituted in the future against Digital World, TMTG, the Combined Entity or others following announcement of the Merger Agreement and the transactions contemplated therein or following consummation of the Business Combination;

 

   

the inability to complete the transactions contemplated by the Merger Agreement due to the failure to obtain approval of the stockholders of Digital World or TMTG or other conditions to closing in the Merger Agreement;

 

   

the risk that the proposed transaction disrupts current plans and operations as a result of the announcement and consummation of the Business Combination;

 

7


   

the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things, the ability of the Combined Entity to grow and manage growth profitably, maintain relationships with customers, compete within its industry and retain its key employees;

 

   

costs related to the proposed Business Combination;

 

   

the possibility that Digital World, TMTG or the Combined Entity may be adversely impacted by other economic, business, and/or competitive factors;

 

   

risks related to the global COVID-19 pandemic and other macroeconomic or geopolitical developments;

 

   

future exchange and interest rates;

 

   

the risk that Digital World, or the Combined Entity fails to maintain an effective system of disclosure controls and internal controls over financial reporting, Digital World’s or the Combined Entity’s ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired; and

 

   

other risks and uncertainties indicated in this proxy statement/prospectus, including those under “Risk Factors” herein, and other filings that have been made or will be made with the SEC by Digital World or the Combined Entity.

These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this proxy statement/prospectus are more fully described under the heading “Risk Factors” and elsewhere in this proxy statement/prospectus. The risks described under the heading “Risk Factors” are not exhaustive. Other sections of this proxy statement/prospectus describe additional factors that could adversely affect the business, financial condition or results of operations of Digital World and TMTG prior to the Business Combination, and the Combined Entity following the Business Combination. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can Digital World or TMTG assess the impact of all such risk factors on the business of Digital World and TMTG prior to the Business Combination, and the Combined Entity following the Business Combination, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Forward-looking statements are not guarantees of performance. This is particularly true for a company like TMTG that has a limited operating history to reference. All forward-looking statements attributable to Digital World or TMTG or persons acting on their behalf are expressly qualified in their entirety by the foregoing cautionary statements.

 

8


QUESTIONS AND ANSWERS

The following questions and answers briefly address some commonly asked questions about the proposals to be presented at the Digital World Special Meeting. The following questions and answers do not include all the information that is important to stockholders of Digital World. We urge the stockholders of Digital World to read carefully this entire proxy statement/prospectus, including the annexes and other documents referred to herein.

QUESTIONS AND ANSWERS ABOUT THE DIGITAL WORLD PROPOSALS

 

Q.

Why am I receiving this proxy statement/prospectus?

 

A.

Digital World stockholders are being asked to consider and vote upon a proposal to approve the Business Combination contemplated by the Merger Agreement, among other proposals. Pursuant to the Merger set forth in the Merger Agreement, TMTG will become a wholly-owned subsidiary of Digital World. A copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A.

This proxy statement/prospectus and its annexes contain important information about the proposed Business Combination and the other matters to be acted upon at the Digital World Special Meeting. You should read this proxy statement/prospectus and its annexes carefully and in their entirety.

THE VOTE OF DIGITAL WORLD STOCKHOLDERS IS IMPORTANT. DIGITAL WORLD STOCKHOLDERS ARE URGED TO SUBMIT THEIR PROXIES AS SOON AS POSSIBLE AFTER CAREFULLY REVIEWING THIS PROXY STATEMENT/PROSPECTUS AND ITS ANNEXES AND CAREFULLY CONSIDERING EACH OF THE PROPOSALS BEING PRESENTED AT THE MEETING.

Below are proposals on which Digital World stockholders are being asked to vote.

1) The Business Combination Proposal (Proposal 1).

Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time:

 

  (a)

the outstanding shares of Class A common stock, par value $0.0001 per share, of Digital World (“Digital World Class A common stock”), including any shares of Class B common stock, par value $0.0001 per share, of Digital World (“Digital World Class B common stock”, and together with the Digital World Class A common stock, the “Digital World common stock”) that are converted into Digital World Class A common stock in accordance with Digital World’s amended and restated certificate of incorporation (the “Digital World Charter”), will be redesignated as common stock, par value $0.0001 per share, of Trump Media & Technology Group Corp. (which will be the new name of Digital World after the Closing, as described below, “New Digital World”) (referred to herein as “New Digital World common stock”);

 

  (b)

As consideration for the Merger, the TMTG securityholders as of immediately prior to the Effective Time (“TMTG securityholders”), shall be entitled to receive from Digital World, a number of shares of New Digital World common stock in an amount equal to $875,000,000, subject to adjustments for TMTG’s closing debt, net of cash, and unpaid transaction expenses (the “Merger Consideration”), plus the additional contingent right to receive the Earnout Shares (as defined below) after the closing of the Business Combination, provided that it shall exclude any additional shares issuable upon conversion of certain TMTG convertible notes (the “Closing”), as described below, and upon the Merger (i) all of the issued and outstanding capital stock of TMTG immediately prior to the Effective Time (other than those properly exercising any applicable appraisal rights under Delaware law) will automatically be cancelled and shall cease to exist, in exchange for the right to receive pro rata shares of the aggregate merger consideration to be paid to the TMTG stockholders as of immediately prior to the Effective Time, (ii) each outstanding option to acquire shares of TMTG common stock (whether

 

9


  vested or unvested) will be assumed by Digital World and automatically converted into an option to acquire shares of New Digital World common stock, with its price and number of shares equitably adjusted based on the conversion ratio of the shares of TMTG common stock into the Merger Consideration, and (iii) each outstanding restricted stock unit of TMTG shall be converted into a restricted stock unit relating to shares of New Digital World common stock, as provided in the Merger Agreement and as more particularly described in the notice that follows this page and elsewhere in this proxy statement/prospectus; and described in the notice that follows this page and elsewhere in this proxy statement/prospectus; and

 

  (c)

the TMTG stockholders will also have a contingent right to receive up to an additional 40,000,000 shares of New Digital World common stock (the “Earnout Shares”) after the Closing based on the price performance of the New Digital World common stock during the three (3) year period following the Closing (the “Earnout Period”). The Earnout Shares shall be earned and payable during the Earnout Period as follows:

 

   

if the dollar volume-weighted average price (“VWAP”) of New Digital World common stock equals or exceeds $15.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an aggregate of an additional 15,000,000 Earnout Shares;

 

   

if the VWAP of New Digital World common stock equals or exceeds $20.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an aggregate of an additional 15,000,000 Earnout Shares; and

 

   

if the VWAP of New Digital World common stock equals or exceeds $30.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an aggregate of an additional 10,000,000 Earnout Shares.

The Merger Consideration will be subject to a post-Closing true up 90 days after the Closing.

In addition to the approval of the Proposals at the Digital World Special Meeting, unless waived by the parties to the Merger Agreement, in accordance with applicable law, the closing of the Business Combination is subject to a number of conditions set forth in the Merger Agreement including, among others, receipt of the requisite stockholder approval contemplated by this proxy statement/prospectus. For more information about the closing conditions to the Business Combination, see the section titled “Business Combination Proposal — Conditions to the Closing.”

The Merger Agreement may be terminated at any time prior to the Closing of the Business Combination upon agreement of TMTG and Digital World, or by TMTG or Digital World acting alone, in specified circumstances. For more information about the termination rights under the Merger Agreement, see the section titled “Business Combination Proposal — Termination.”

Pursuant to the Digital World Charter, in connection with the Business Combination, holders of Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Digital World Charter. As of _________, 2022, the pro rata portion of the funds available in the Trust Account for the Public Shares was approximately $____ per share. If a holder exercises its redemption rights in connection with the Business Combination, then such holder will be exchanging its Class A common stock for cash and will only have equity interests in the Combined Entity pursuant to its right to the exercise of its Public Warrants, to the extent it still holds Public Warrants. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to our transfer agent at least two business days prior to the Digital World Special Meeting. Holders of Public Shares may elect to redeem their shares whether or not such shares are voted at the Digital World Special Meeting. See the section titled “Digital World Special Meeting — Redemption Rights.”

The transactions contemplated by the Merger Agreement will be consummated only if the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan

 

10


Proposal and the Nasdaq Proposal are approved at the Digital World Special Meeting. In addition, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal are conditioned on the approval of the Business Combination Proposal (and the Business Combination Proposal is conditioned on the approval of the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal). The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus.

The Combined Entity’s board of directors will increase to seven members upon the closing of the Business Combination. In accordance with the Amended Charter to be filed immediately after the closing of the Business Combination, the board of directors of the Combined Entity will be divided into three classes, with each director to serve for a three-year term, except for the initial terms after the Closing. At each annual meeting of stockholders of the Combined Entity, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following the election. See the Charter Amendment Proposals below for more information.

The Business Combination involves numerous risks. For more information about these risks, see the section titled “Risk Factors.”

2) The Charter Amendment Proposals (Proposals 2 through 6).

Digital World stockholders will be asked to approve and adopt, subject to and conditioned on (but with immediate effect therefrom) approval of each of the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal and the consummation of the Business Combination, a second amendment and restatement of the Digital World Charter, as set out in the draft second amended and restated version of Digital World’s certificate of incorporation appended to this proxy statement/prospectus as Annex B (the “Amended Charter”), for the following amendments (collectively, the “Charter Amendment Proposals”):

 

  (a)

Name Change – To provide that the name of New Digital World shall be changed to “Trump Media & Technology Group Corp.” (Proposal 2);

 

  (b)

Board Structure and Composition – To provide for the structure of the post-Closing board of directors of the Combined Entity, split into three classes of as even size as practicable, Class I, II, and III each to serve a term of three (3) years, except for the initial term, for which the Class I directors will be up for reelection at the first annual meeting of stockholders occurring after the Closing, and for which the Class II directors will be up for reelection at the second annual meeting of stockholders occurring after the Closing. Directors will not be able to be removed during their term except for cause, and then only by the affirmative vote of only by the affirmative vote of the holders of not less than two thirds (2/3) of the outstanding shares of capital stock then entitled to vote at an election of directors. The size of the board of directors of the Combined Entity shall be determined by resolution of the board of directors of the Combined Entity but will initially be seven (7) (Proposal 3);

 

  (c)

Amendment of Blank Check Provisions – To remove and change certain provisions in the Digital World Charter related to Digital World’s status as a special purpose acquisition company, including the deletion of Article IX of the Digital World Charter in its entirety (Proposal 4);

 

  (d)

The Authorized Share Charter Amendment – To increase the number of authorized shares of common stock and preferred stock to accommodate the shares to be issued in the PIPE Investment and upon conversion of the preferred stock issued in the PIPE Investment (Proposal 5); and

 

  (e)

Amendment and Restatement of the Digital World Charter – Conditioned on the approval of Proposals 2-4, a proposal to approve the proposed Amended Charter in the form attached as Annex B hereto, which includes the approval of all other changes in the proposed charter in connection with replacing the existing Digital World Charter with the proposed Amended Charter as of the Effective Time (Proposal 6).

 

11


3) The Director Election Proposal (Proposal 7)

To consider and vote upon a proposal to elect seven (7) directors to serve on the Combined Entity’s board of directors effective from the consummation of the Business Combination until the 2023 annual meeting of stockholders and until their respective successors are duly elected and qualified (Proposal 7).

4) The Incentive Plan Proposal (Proposal 8)

Digital World is proposing that its stockholders approve and adopt the Equity Incentive Plan, which will become effective upon the Closing of the Business Combination.

The Equity Incentive Plan will reserve a number of shares of New Digital World common stock equal to 7.5% of the fully diluted, and as converted, amount of New Digital World common stock to be outstanding immediately following consummation of the Business Combination , or _________ shares, for issuance for awards in accordance with the terms of the Equity Incentive Plan. The purpose of the Equity Incentive Plan is to assist in attracting, retaining, motivating, and rewarding certain key employees, officers, directors, and consultants of New Digital World and its affiliates and promoting the creation of long-term value for stockholders of New Digital World by closely aligning the interests of such individuals with those of other stockholders. The Equity Incentive Plan authorizes the award of share-based incentives to encourage eligible employees, officers, directors, and consultants, as described below, to expend maximum effort in the creation of stockholder value.

A summary of the Equity Incentive Plan is set forth in the “The Incentive Plan Proposal” section of this proxy statement/prospectus and a complete copy of the Equity Incentive Plan is attached hereto as Annex C. You are encouraged to read the Equity Incentive Plan in its entirety.

5) The Nasdaq Proposal (Proposal 9)

To consider and vote upon a proposal to approve, for purposes of complying with Nasdaq Listing Rule 5635, (a) the issuance of 85,784,314 newly issued shares of common stock in the Business Combination, which amount will be determined as described in more detail in the accompanying proxy statement/prospectus, (b) the issuance of up to 29,761,905 shares of common stock in connection with the PIPE Investment, subject to adjustment as described in more detail in the accompanying proxy statement/prospectus, (c) the issuance of up to _________ shares of common stock underlying Working Capital Units issuable upon conversion of any convertible notes of Digital World that may be issued to Digital World’s sponsor or its affiliates, and (d) the issuance of up to _________ shares of common stock issuable upon conversion after the Closing of outstanding convertible notes of TMTG in connection with the consummation of the Business Combination.

6) The Adjournment Proposal (Proposal 10)

To consider and vote upon a proposal to adjourn the Digital World Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Digital World Special Meeting, there are not sufficient votes to approve the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal or the Nasdaq Proposal.

 

Q:

When and where will the Digital World Special Meeting take place?

 

A:

The Digital World Special Meeting will be held on ______________, 2022, at 10:00 a.m., Eastern Time, via live audio webcast at https://www.cstproxy.com/dwacspac/2022 or such other date, time and place to which such meeting may be adjourned or postponed, to consider and vote upon the proposals.

 

Q:

Are the proposals conditioned on one another?

 

A:

Unless the Business Combination Proposal is approved, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal, and the Nasdaq Proposal will not be presented to the

 

12


  stockholders of Digital World at the Digital World Special Meeting, insofar as the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal are conditioned on the approval of the Business Combination Proposal (and the Business Combination Proposal is conditioned on the approval of the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal. The Adjournment Proposal is not conditioned on the approval of any other proposal set forth in this proxy statement/prospectus. It is important for you to note that if the Business Combination Proposal does not receive the requisite vote for approval, we will not consummate the Business Combination. If Digital World does not consummate the Business Combination and fails to complete an initial business combination by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), Digital World will be required, in accordance with the Digital World Charter, to dissolve and liquidate its Trust Account by returning the then remaining funds in such account (less amounts released to pay tax obligations and up to $100,000 for dissolution expenses, and amounts paid pursuant to redemptions) to its public stockholders, unless it seeks and obtains the approval of Digital World stockholders to amend the Digital World Charter to extend such date.

 

Q:

What will happen in the Business Combination?

 

A:

At the Closing, Merger Sub will merge with and into TMTG, with TMTG surviving such Merger, as a result of which the (i) TMTG stockholders (except those who properly exercise appraisal rights under applicable Delaware law) will receive newly issued shares of New Digital World common stock, (ii) each outstanding option to acquire shares of TMTG common stock (whether vested or unvested) will be assumed by Digital World and automatically converted into an option to acquire shares of New Digital World common stock, with its price and number of shares equitably adjusted based on the conversion ratio of the shares of TMTG common stock into the Merger Consideration, and (iii) each outstanding restricted stock unit of TMTG shall be converted into a restricted stock unit relating to shares of New Digital World common stock and any other outstanding TMTG securities will be terminated and cancelled without consideration. Upon consummation of the Business Combination, TMTG will become a wholly-owned subsidiary of Digital World and Digital World will change its name to Trump Media & Technology Group Corp. After the Closing of the Business Combination, the cash held in the Trust Account will be released from the Trust Account and used to pay each of Digital World’s and TMTG’s transaction expenses and other liabilities of Digital World due as of the Closing, and for working capital and general corporate purposes. A copy of the Merger Agreement is attached to this proxy statement/prospectus asAnnex A.

 

Q:

What equity stake will current stockholders of Digital World, PIPE Investors, and TMTG securityholders hold in the Combined Entity after the Closing?

 

A:

It is anticipated that, upon the completion of the Business Combination, and prior to the PIPE, Digital World’s public stockholders will retain an ownership interest of approximately 23.7% of the outstanding capital stock of the Combined Entity, the Sponsor will retain an ownership interest of approximately 6.2% of the outstanding capital stock of the Combined Entity and the TMTG securityholders will own approximately 70.1% of the outstanding capital stock of the Combined Entity. The PIPE Investors will purchase up to an aggregate of 1,000,000 shares of Digital World’s Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000 per share (the “PIPE”), initially convertible into 29,761,905 shares of common stock, subject to upward adjustment as described herein, or, assuming full conversion at the initial conversion price, approximately 19.0% of the outstanding New Digital World Common Stock. As a result, and giving effect to the PIPE and assuming immediate and full conversion of the Preferred Stock, Digital World’s public stockholders will retain an ownership interest of approximately 19.2% of the outstanding capital stock of the Combined Entity, the Sponsor will retain an ownership interest of approximately 5.1% of the outstanding capital stock of the Combined Entity and the TMTG securityholders will own approximately 56.7% of the outstanding capital stock of the Combined Entity. The foregoing ownership percentages with respect to the Combined Entity following the Business Combination exclude any outstanding Warrants and assume that (i) there are no redemptions of any shares by Digital World’s public stockholders in connection with the Business Combination, (ii) no awards are issued under

 

13


  the Equity Incentive Plan and (iii) no Working Capital Units or Extension Units are issued. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by Digital World’s existing stockholders in the Combined Entity will be different.

If any of the Digital World’s public stockholders exercise their redemption rights, the percentage of the Combined Entity’s outstanding common stock held by Digital World’s public stockholders will decrease and the percentages of the Combined Entity’s outstanding common stock held by the Sponsor and by the TMTG securityholders will increase, in each case relative to the percentage held if none of the Public Shares are redeemed. If any of Digital World’s public stockholders redeem their Public Shares at Closing but continue to hold Public Warrants after the Closing, the aggregate market value of the Public Warrants that may be retained by them, based on the closing trading price per Public Warrant as of March 31, 2022, would be $242,362,500 regardless of the amount of redemptions by the public stockholders. Upon the issuance of New Digital World Common Stock in connection with the Business Combination, the percentage ownership of the Combined Entity by Digital World’s public stockholders who do not redeem their Public Shares will be diluted. Digital World public stockholders that do not redeem their Public Shares in connection with the Business Combination will experience further dilution upon the exercise of Public Warrants that are retained after the Closing by redeeming Public Shareholders. The percentage of the total number of outstanding shares of Common Stock that will be owned by Digital World’s public stockholders as a group will vary based on the number of Public Shares for which the holders thereof request redemption in connection with the Business Combination and the number of shares of common stock issued upon conversion of the Preferred Stock. The following table illustrates varying beneficial ownership levels in the Combined Entity, as well as possible sources and extents of dilution for non-redeeming public stockholders, excluding the conversion of the shares of Preferred Stock and assuming no redemptions by public stockholders, 33.3% redemption by public stockholders, 50% redemption by public stockholders, 66.7% redemption by public stockholders and the maximum redemptions by public stockholders:

 

    No
redemption
    33.3% of
maximum
redemption
    50% of
maximum
redemption
    66.7% of
maximum
redemption
    Maximum
redemption
 

Digital World public stockholders

    30,027,234       23.7     20,453,484       17.4     15,652,234       14.0     10,850,984       10.0     1,277,234       1.3

Digital World Sponsor

    7,931,548       6.2     7,931,548       6.98     7,931,548       7.0     7,931,548       7.4     7,931,548       8.1

TMTG stockholders

    88,948,023       70.1     88,948,023       75.8     88,948,023       79.0     88,948,023       82.6     88,948,023       90.6
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

Total

    126,906,805         117,333,055         112,531,805         107,730,555         98,156,805    
 

 

 

     

 

 

     

 

 

     

 

 

     

 

 

   

All of the relative percentages above are for illustrative purposes only and are based upon certain assumptions. See the section titled “Unaudited Pro Forma Condensed Combined Financial Information” for further information.

Should one or more of the assumptions prove incorrect, actual beneficial ownership percentages may vary materially from those described in this proxy statement/prospectus as anticipated, believed, estimated, expected or intended.

 

Q:

What conditions must be satisfied to complete the Business Combination?

 

A:

There are a number of closing conditions in the Merger Agreement, including the approval by the stockholders of Digital World of the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal. The Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal are subject to and conditioned on the approval of the Business Combination Proposal. The Business Combination Proposal is subject to and conditioned on the approval of the Charter Amendment Proposals,

 

14


  the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal. For a summary of the conditions that must be satisfied or waived prior to the closing of the Business Combination, see the section titled “The Business Combination Proposal — The Merger Agreement.”

 

Q:

Why is Digital World providing stockholders with the opportunity to vote on the Business Combination?

 

A:

Under the Digital World Charter, Digital World must provide all holders of its Public Shares with the opportunity to have their Public Shares redeemed upon the consummation of Digital World’s initial business combination either in conjunction with a tender offer or in conjunction with a stockholder vote. For business and other reasons, Digital World has elected to provide its stockholders with the opportunity to have their Public Shares redeemed in connection with a stockholder vote rather than a tender offer. Therefore, Digital World is seeking to obtain the approval of its stockholders of the Business Combination Proposal in order to allow its public stockholders to effectuate redemptions of their Public Shares in connection with the closing of the Business Combination.

 

Q:

Did the Digital World Board obtain a third-party valuation or fairness opinion in determining whether or not to proceed with the Business Combination?

 

A:

No. The Digital World Board did not obtain a fairness opinion.

 

Q:

Are there any arrangements to help ensure that Digital World will have sufficient funds, together with the proceeds in its Trust Account, to consummate the Business Combination?

 

A:

Yes. On December 4, 2021, in support of the TMTG Business Combination, Digital World entered into securities purchase agreements (the “SPAs”) with certain institutional investors (the “PIPE Investors”), pursuant to which the PIPE Investors agreed to purchase up to an aggregate of 1,000,000 shares of Digital World’s Series A Convertible Preferred Stock (the “Preferred Stock”) for a purchase price of $1,000 per share for an aggregate commitment of up to $1,000,000,000 in a private placement (the “PIPE”) to be consummated concurrently with the Business Combination. The shares are initially convertible into 29,761,905 shares of Digital World common stock, subject to upward adjustment as described herein. The PIPE is conditioned on the concurrent closing of the Business Combination and other customary closing conditions.

 

Q:

How many votes do I have at the Digital World Special Meeting?

 

A:

Digital World stockholders are entitled to one vote at the Digital World Special Meeting for each share of Digital World common stock held of record as of ________, 2022, the record date for the Digital World Special Meeting (the “Record Date”). Holders of Class A common stock and Class B common stock will vote together as one class. As of the close of business on the Record Date, there were __________ outstanding shares of Digital World common stock.

 

Q:

What vote is required to approve the proposals presented at the Digital World Special Meeting?

 

A:

The approval of the Charter Amendment Proposals requires the affirmative vote of a majority of the issued and outstanding Digital World common stock as of the Record Date. Accordingly, a Digital World stockholder’s failure to vote by proxy or to vote in person at the Digital World Special Meeting or an abstention will have the same effect as a vote “AGAINST” the Charter Amendment Proposals.

The approval of Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal each require the affirmative vote of the holders of a majority of the shares of Digital World common stock cast by the stockholders represented in person or by proxy and entitled to vote thereon at the Digital World Special Meeting. A Digital World stockholder’s failure to vote by proxy or to vote in

 

15


person at the Digital World Special Meeting will not be counted towards the number of shares of Digital World common stock required to validly establish a quorum, and if a valid quorum is otherwise established, it will have no effect on the outcome of the vote on the Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal or the Adjournment Proposal. Abstentions will be counted towards the number of shares of Digital World common stock required to validly establish a quorum but will have no effect on the outcome of the vote on the Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal or the Adjournment Proposal.

The approval of the Director Election Proposal requires a plurality vote of the shares of Digital World common stock cast by the stockholders represented in person or by proxy and entitled to vote thereon at the Digital World Special Meeting. A plurality means that the individuals who receive the largest number of votes cast “FOR” are elected as directors. A Digital World stockholder’s failure to vote by proxy or to vote in person at the Digital World Special Meeting will have no effect on the Director Election Proposal. You may vote “FOR” or “WITHHOLD” authority to vote for each of the director nominees with respect to the Director Election Proposal. “WITHHOLD” votes will be counted towards the number of shares of Digital World common stock required to validly establish a quorum but will have no effect on the outcome of the vote on the Director Election Proposal.

If the Business Combination Proposal is not approved, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal will not be presented to the Digital World stockholders for a vote. The approval of the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal are preconditions to the consummation of the Business Combination.

The Sponsor, directors, officers and the anchor investors of Digital World have agreed to vote their Founder Shares and Placement Shares, as applicable, in favor of the Business Combination, including the Business Combination Proposal and the other Proposals. As a result, in addition to the Founder Shares and Placement Shares, we would need only 982,701, or approximately 3.4%, of the 28,750,000 Public Shares, to be voted in favor of the Business Combination in order to have the Business Combination approved, assuming only the minimum number of shares representing a quorum is present at the Digital World Special Meeting held to vote on the Business Combination and assuming that the Sponsor, directors, officers and the anchor investors do not purchase any units in Digital World IPO or units or shares in the after-market.

 

Q:

What constitutes a quorum at the Digital World Special Meeting?

 

A:

Holders of a majority in voting power of Digital World common stock issued and outstanding and entitled to vote at the Digital World Special Meeting constitute a quorum. In the absence of a quorum, the chairman of the meeting has power to adjourn the Digital World Special Meeting. As of the Record Date, __________ shares of Digital World common stock would be required to achieve a quorum.

 

Q:

How will the Sponsor, directors, officers and anchor investors of Digital World vote?

 

A:

The Sponsor, directors and officers of Digital World have agreed to vote their Founder Shares, Placement Shares, as well as any Public Shares purchased during or after the Digital World IPO, and the anchor investors of Digital World have agreed to vote their Founder Shares, in favor of the initial business combination, including the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal.

As a result, in addition to the Founder Shares and Placement Shares, we would need only 982,701, or approximately 3.4%, of the 28,750,000 Public Shares, to be voted in favor of the Business Combination in order to have the Business Combination approved, assuming only the minimum number of shares representing a quorum is present at the Digital World Special Meeting held to vote on the Business Combination. Accordingly, if Digital World seeks stockholder approval of its initial business combination, it is more likely that the necessary stockholder approval will be received than would be the case if the Sponsor, directors, officers and anchor investors agreed to vote their shares in accordance with the majority of the votes cast by Digital World’s public stockholders.

 

16


Q:

What interests do Digital World’s current officers and directors have in the Business Combination?

 

A:

_______ and _______ will remain as directors of the Combined Entity following the Business Combination. None of the Sponsor or current officers or directors of Digital World will receive any interest in the Business Combination other than the interests they owned prior to the Business Combination or as described above. The interests of the Sponsor or current officers or directors of Digital World may be different from or in addition to (and which may conflict with) your interest. These interests include:

 

   

unless Digital World consummates an initial business combination, Digital World’s officers and directors and the Sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the Trust Account;

 

   

the Sponsor and directors and officers of Digital World paid an aggregate of $25,000 for their Founder Shares and such securities will have a significantly higher value at the time of the Business Combination. Such shares, including the shares underlying the units, had an aggregate market value of approximately $357.22 million based upon the closing price of Digital World’s common stock of $64.51 per share on Nasdaq on March 31, 2022;

 

   

as a condition to the Digital World IPO, the Founder Shares became subject to a lock-up whereby, subject to certain limited exceptions, the Founder Shares cannot be transferred until the earlier of (A) six months after the completion of Digital World’s initial business combination; (B) subsequent to Digital World’s initial business combination, when the reported last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after Digital World’s initial business combination;

 

   

an aggregate of 1,133,484 Placement Units were issued to the Sponsor simultaneously with the consummation of the IPO and the underwriters’ exercise of its over-allotment option. Such units had an aggregate market value of approximately $85.51 million based upon the closing price of Digital World’s units of $75.44 per unit on Nasdaq on March 31, 2022;

 

   

the Sponsor has agreed that the Placement Units, and all of their underlying securities, will not be sold or transferred by it until 30 days after Digital World has completed a business combination, subject to limited exceptions;

 

   

the Sponsor and directors and officers of Digital World have agreed not to redeem any shares of Digital World common stock they hold in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the Sponsor may loan to Digital World additional funds for working capital purposes prior to the Business Combination. There are no working capital loans from the Sponsor currently outstanding. If the Business Combination is not consummated and Digital World does not otherwise consummate another business combination prior to September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), then there will likely be insufficient funds to pay the working capital loans;

 

   

at the Sponsor’s discretion, $2,875,000 may be loaned by the Sponsor or its affiliates or designees for each three-month extension (for up to $5,750,000) of the time that Digital World has to consummate a business combination, which amount may be converted into Extension Units, at the price of $10.00 per unit. Such units would be identical to the Placement Units;

 

   

Pursuant to the PIPE Waiver Letter (as defined below), if the Business Combination is consummated, Digital World’s Initial Stockholders shall receive an aggregate of 744,048 shares of Class A common stock and 744,048 warrants, which warrants shall be substantially identical to the Placement Warrants;

 

17


   

if Digital World does not complete an initial business combination by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), a portion of the proceeds from the sale of the Placement Units will be included in the liquidating distribution to Digital World’s public stockholders. In such event, the 7,187,500 Founder Shares and 1,133,484 shares of Class A common stock underlying the Placement Units, of which 5,537,500 Founder Shares and shares of 1,133,484 Class A common stock are held by Digital World’s Sponsor, directors and officers, would be worthless because they are not entitled to participate in any Redemption or distribution with respect to such shares. Such shares and units had an aggregate market value of $549.18 million as of March 31, 2022, based on the closing price per Class A common stock of Digital World as of March 31, 2022 of $64.51 per share and the closing price of Digital World’s units of $75.44 per unit on Nasdaq on March 31, 2022. Additionally, the Placement Warrants underlying the Placement Units will expire worthless.

 

   

if the Trust Account is liquidated, including in the event Digital World is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify Digital World to ensure that the proceeds in the Trust Account are not reduced below $10.20 per Public Share by the claims of prospective target businesses with which Digital World has entered into an acquisition agreement or claims of any third party for services rendered or products sold to Digital World, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account.

 

   

The Sponsor (including its representatives and affiliates) and Digital World’s directors and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to Digital World. For example, Patrick Orlando, Digital World’s Chief Executive Officer and Chairman, serves as Chief Executive officer and director of Benessere Capital Acquisition Corp. and Eric Swider and Justin Shaner, Digital World’s directors, both serve as directors of Benessere Capital Acquisition Corp. Benessere Capital Acquisition Corp. is a special purpose acquisition company, which entered into an Agreement and Plan of Merger with eCombustible Energy LLC on November 23, 2021. Mr. Orlando also serves as a director of Maquia Capital Acquisition Corp., a special purpose acquisition corporation that is focusing its search for a business combination with technology-focused middle market and emerging growth companies in North America. The Sponsor and Digital World’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to Digital World completing its initial business combination. Digital World’s directors and officers also may become aware of business opportunities which may be appropriate for presentation to Digital World, and the other entities to which they owe certain fiduciary or contractual duties, including Benessere Capital Acquisition Corp. and Maquia Capital Acquisition Corp. Accordingly, they may have had conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in Digital World’s favor and such potential business opportunities may be presented to other entities prior to their presentation to Digital World, subject to applicable fiduciary duties under DGCL. Digital World Charter provides that Digital World renounces its interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of Digital World and such opportunity is one Digital World is legally and contractually permitted to undertake and would otherwise be reasonable for Digital World to pursue, and to the extent the director or officer is permitted to refer that opportunity to Digital World without violating another legal obligation.

 

   

Messrs. __________ and __________ are expected to be appointed as directors of the Combined Entity after the consummation of the Business Combination, Messrs. __________ and __________ may in the future receive cash fees, stock options or stock awards that the Combined Entity determines to pay to its directors.

 

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These interests may influence Digital World’s directors in making their recommendation that you vote in favor of the approval of the Business Combination.

 

Q:

What interests do TMTGs current officers and directors have in the Business Combination?

 

A:

Members of the TMTG Board and its executive officers have interests in the Business Combination that may be different from or in addition to (and which may conflict with) your interest. These interests include, without limitation, the following:

 

   

President Donald J. Trump of TMTG is expected to serve as Chairman of the Board of the Combined Entity after consummation of the Business Combination;

 

   

Devin Nunes, as Chief Executive Officer, who currently serves on the TMTG Board, may serve as a director of the Combined Entity after consummation of the Business Combination and TMTG may nominate one or more of its existing directors to serve on the board after consummation of the Business Combination;

 

   

TMTG’s executive officers have employment arrangements that increase compensation in connection with the Business Combination;

 

   

Incentive bonuses earned in 2021 (but not yet paid) by some TMTG executive officers become payable shortly following the consummation of the Business Combination; and

 

   

Upon consummation of the Business Combination, and subject to approval of the Incentive Plan Proposal, TMTG’s executive officers are expected to receive grants of stock options and restricted stock units under the Equity Incentive Plan from time to time as determined by the Compensation Committee. In addition, the outstanding TMTG Options and TMTG RSUs granted to TMTG’s executive officers and certain members of the TMTG Board under the TMTG 2022 Plan prior to the Closing of the Business Combination will be assumed and converted to options and RSUs under the Equity Incentive Plan effective as of the Closing the Business Combination.

Please see the sections entitled “Risk Factors” and “The Business Combination Proposal — Interests of TMTG’s Directors and Officers in the Business Combination” and “Executive and Director Compensation of TMTG” of this proxy statement/prospectus for a further discussion of these and other interests.

 

Q:

What happens if I sell my shares of Class A common stock before the Digital World Special Meeting?

 

A:

The Record Date is earlier than the date of the Digital World Special Meeting. If you transfer your shares of Class A common stock after the Record Date, but before the Digital World Special Meeting, unless the transferee obtains from you a proxy to vote those shares, you will retain your right to vote at the Digital World Special Meeting. However, you will not be able to seek redemption of your shares because you will no longer be able to deliver them for cancellation upon consummation of the Business Combination in accordance with the provisions described herein. If you transfer your shares of Class A common stock prior to the Record Date, you will have no right to vote those shares at the Digital World Special Meeting.

 

Q:

What happens if a substantial number of the public stockholders vote in favor of the Business Combination and exercise their redemption right?

 

A:

Digital World stockholders who vote in favor of the Business Combination may also nevertheless exercise their redemption rights. Accordingly, the Business Combination may be consummated even though the funds available from the Trust Account and the number of public stockholders are reduced as a result of redemptions by public stockholders. Nonetheless, the consummation of the Business Combination is conditioned upon, among other things, having at least $5,000,001 in net tangible assets immediately prior to or upon consummation of the Business Combination as described herein. In addition, with fewer Public Shares and public stockholders, the trading market for the Combined Entity’s stock may be less liquid than

 

19


  the market for Digital World common stock was prior to consummation of the Business Combination and the Combined Entity may not be able to meet the listing standards for Nasdaq. In addition, with less funds available from the Trust Account, the working capital infusion from the Trust Account into TMTG’s business will be reduced. As a result, the proceeds will be greater in the event that no public stockholders exercise redemption rights with respect to their Public Shares for a pro rata portion of the Trust Account as opposed to the scenario in which Digital World’s public stockholders exercise the maximum allowed redemption rights.

 

Q:

What happens if I vote against any of the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal or the Nasdaq Proposal?

 

A:

If any of the Required Proposals are not approved, the Business Combination is not consummated and Digital World does not otherwise consummate an alternative business combination by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), pursuant to the Digital World Charter, Digital World will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to the public stockholders, unless (in the event the Business Combination is not consummated by March 8, 2023) Digital World seeks and obtains the consent of its stockholders to amend the Digital World Charter to extend the date by which it must consummate its initial business combination (an “Extension”).

 

Q:

Do I have redemption rights in connection with the Business Combination?

 

A:

Pursuant to the Digital World Charter, holders of Public Shares may elect to have their shares redeemed for cash at the applicable redemption price per share calculated in accordance with the Digital World Charter. As of the Record Date, based on funds in the Trust Account of $_____ as of such date, the pro rata portion of the funds available in the Trust Account for the redemption of public shares of Digital World Class A common stock was approximately $_____ per share. If a holder exercises its redemption rights, then such holder will be exchanging its Class A common stock for cash and will only have equity interests in the Combined Entity pursuant to the exercise of its Public Warrants, to the extent it still holds Public Warrants. Such a holder will be entitled to receive cash for its Public Shares only if it properly demands redemption and delivers its shares (either physically or electronically) to Digital World’s transfer agent prior to the Digital World Special Meeting. See the section titled “Digital World Special Meeting — Redemption Rights” for the procedures to be followed if you wish to redeem your shares for cash.

 

Q:

Will how I vote affect my ability to exercise redemption rights?

 

A:

No. You may exercise your redemption rights whether or not you attend or vote your shares of Digital World common stock at the Digital World Special Meeting, and regardless of how you vote your shares. As a result, the Merger Agreement and the Required Proposals can be approved by stockholders who will redeem their shares and no longer remain stockholders, leaving stockholders who choose not to redeem their shares holding shares in a company with a potentially less liquid trading market, fewer stockholders, potentially less cash and the potential inability to meet the listing standards of Nasdaq.

 

Q:

How do I exercise my redemption rights?

 

A:

In order to exercise your redemption rights, you must, prior to 5:00 p.m., Eastern Time, on _________, 2022 (two (2) business days before the Digital World Special Meeting), tender your shares physically or electronically and submit a request in writing that we redeem your Public Shares for cash to Continental Stock Transfer & Trust Company, our transfer agent, at the following address:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, New York 10004

Attn: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

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Please also affirmatively certify in your request to Continental Stock Transfer & Trust Company for redemption if you “ARE” or “ARE NOT” acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) with any other stockholder with respect to shares of Common Stock. A holder of the Public Shares, together with any affiliate of his or any other person with whom he is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act) will be restricted from seeking redemption rights with respect to more than an aggregate of 15% of the Public Shares, which we refer to as the “15% threshold,” without the prior consent of Digital World. Accordingly, all Public Shares in excess of the 15% threshold beneficially owned by a public stockholder or group will not be redeemed for cash.

Stockholders seeking to exercise their redemption rights and opting to deliver physical certificates should allot sufficient time to obtain physical certificates from the transfer agent and time to effect delivery. It is Digital World’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, Digital World does not have any control over this process and it may take longer than two weeks. Stockholders who hold their shares in street name will have to coordinate with their bank, broker or other nominee to have the shares certificated or delivered electronically.

Any demand for redemption, once made, may be withdrawn at any time until the deadline for exercising redemption requests and thereafter, with Digital World’s consent, until the vote is taken with respect to the Business Combination. If you delivered your shares for redemption to Digital World’s transfer agent and decide within the required timeframe not to exercise your redemption rights, you may request that Digital World’s transfer agent return the shares (physically or electronically). You may make such request by contacting Digital World’s transfer agent at the phone number or address listed under the question “Who can help answer my questions?” below.

 

Q.

What are the U.S. federal income tax consequences of exercising my redemption rights?

 

A:

We expect that a U.S. holder (as defined herein) that exercises its redemption rights to receive cash from the Trust Account in exchange for its Public Shares will generally be treated as selling such Public Shares resulting in the recognition of capital gain or capital loss. There may be certain circumstances in which the redemption may be treated as a distribution for U.S. federal income tax purposes depending on the amount of Public Shares that a U.S. holder owns or is deemed to own (including through the ownership of Public Warrants). For a more complete discussion of the U.S. federal income tax considerations of an exercise of redemption rights, see “The Business Combination Proposal — United States Federal Income Tax Considerations of the Redemption.

TAX MATTERS ARE COMPLICATED, AND THE TAX CONSEQUENCES OF EXERCISING YOUR REDEMPTION RIGHTS WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE EXERCISE OF REDEMPTION RIGHTS TO YOU IN YOUR PARTICULAR CIRCUMSTANCES.

 

Q:

If I am a Warrant holder, can I exercise redemption rights with respect to my Warrants?

 

A:

No. The holders of Warrants have no redemption rights with respect to Warrants.

 

Q:

If I am a Public Unit holder, can I exercise redemption rights with respect to my Public Units?

 

A:

No. Holders of outstanding Public Units must separate the constituent Public Shares and Public Warrants prior to exercising redemption rights with respect to the Public Shares.

If you hold Public Units registered in your own name, you must deliver the certificate for such Public Units to Continental Stock Transfer & Trust Company, our transfer agent, with written instructions to separate such Public Units into Public Shares, and Public Warrants. This must be completed far enough in advance to permit the mailing of the Public Share certificates back to you so that you may then exercise your

 

21


redemption rights upon the separation of the Public Shares from the Public Units. See “How do I exercise my redemption rights?” above. The address of Continental Stock Transfer & Trust Company is listed under the question “Who can help answer my questions?” below.

If a broker, dealer, commercial bank, trust company or other nominee holds your Public Units, you must instruct such nominee to separate your Public Units. Your nominee must send written instructions by facsimile to Continental Stock Transfer & Trust Company, Digital World’s transfer agent. Such written instructions must include the number of Public Units to be split and the nominee holding such Public Units. Your nominee must also initiate electronically, using The Depository Trust Company’s deposit withdrawal at custodian (DWAC) system, a withdrawal of the relevant Public Units and a deposit of an equal number of Public Shares and Public Warrants. This must be completed far enough in advance to permit your nominee to exercise your redemption rights upon the separation of the Public Shares from the Public Units. While this is typically done electronically the same business day, you should allow at least one full business day to accomplish the separation. If you fail to cause your Public Shares to be separated in a timely manner, you will likely not be able to exercise your redemption rights.

 

Q:

Do I have appraisal rights if I object to the proposed Business Combination?

 

A:

No. There are no appraisal rights available to holders of Digital World common stock in connection with the Business Combination.

 

Q:

What happens to the funds held in the Trust Account upon consummation of the Business Combination?

 

A:

If the Business Combination is consummated, the funds held in the Trust Account will be released to pay:

 

   

Digital World stockholders who properly exercise their redemption rights;

 

   

certain other fees, costs and expenses (including regulatory fees, legal fees, accounting fees, printer fees, and other professional fees) that were incurred by Digital World or TMTG in connection with the transactions contemplated by the Business Combination and pursuant to the terms of the Merger Agreement;

 

   

any loans owed by Digital World to its Sponsor for any Digital World transaction expenses, and other administrative expenses incurred by Digital World; and

 

   

for general corporate purposes including, but not limited to, working capital for operations.

Any remaining cash will be used for working capital and general corporate purposes of the Combined Entity.

 

Q:

What happens if the Business Combination is not consummated?

 

A:

There are certain circumstances under which the Merger Agreement may be terminated. See the section titled “The Business Combination Proposal — The Merger Agreement” for information regarding the parties’ specific termination rights.

If, as a result of the termination of the Merger Agreement or otherwise, Digital World is unable to complete the Business Combination or another initial business combination transaction by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), Digital World Charter provides that it will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible, subject to lawfully available funds therefor, redeem 100% of the Public Shares in consideration of a per-share price, payable in cash, equal to the quotient obtained by dividing (A) the aggregate amount then on deposit in the Trust Account, including interest earned on the funds held in the Trust Account and not previously released to it to pay taxes payable and up to $100,000 for dissolution expenses, by (B) the total number of then outstanding Public Shares, which redemption will

 

22


completely extinguish rights of the public stockholders (including the right to receive further liquidation distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemptions, subject to the approval of the remaining stockholders and the board of directors in accordance with applicable law, dissolve and liquidate, subject (in the case of (ii) and (iii) above) to its obligations under the DGCL to provide for claims of creditors and other requirements of applicable law.

Digital World expects that the amount of any distribution its public stockholders will be entitled to receive upon its dissolution will be approximately the same as the amount they would have received if they had redeemed their shares in connection with the Business Combination, subject in each case to Digital World’s obligations under the DGCL to provide for claims of creditors and other requirements of applicable law. Holders of Founder Shares and Placement Shares have waived any right to any liquidation distribution with respect to those shares.

In the event of liquidation, there will be no distribution with respect to Digital World’s outstanding Warrants. Accordingly, the Warrants will expire worthless.

 

Q:

When is the Business Combination expected to be completed?

 

A:

The Closing is expected to take place (a) the second business day following the satisfaction or waiver of the conditions described below under the section titled “The Business Combination Proposal — Conditions to the Closing” or (b) such other date as agreed to by the parties to the Merger Agreement in writing, in each case, subject to the satisfaction or waiver of the Closing conditions. The Merger Agreement may be terminated by either Digital World or TMTG if the Closing has not occurred by September 20, 2022.

For a description of the conditions to the completion of the Business Combination, see the section titled “The Business Combination Proposal.”

 

Q:

What do I need to do now?

 

A:

You are urged to read carefully and consider the information contained in this proxy statement/prospectus, including the annexes, and to consider how the Business Combination will affect you as a stockholder. You should then vote as soon as possible in accordance with the instructions provided in this proxy statement/prospectus and on the enclosed proxy card or, if you hold your shares through a brokerage firm, bank or other nominee, on the voting instruction form provided by the broker, bank or nominee.

 

Q:

How do I vote?

 

A:

If you are a stockholder of record of Digital World as of _________, 2022, the Record Date, you may submit your proxy before the Digital World Special Meeting in any of the following ways, if available:

 

   

use the toll-free number shown on your proxy card;

 

   

visit the website shown on your proxy card to vote via the Internet; or

 

   

complete, sign, date and return the enclosed proxy card in the enclosed postage-paid envelope.

Stockholders who choose to participate in the Digital World Special Meeting can vote their shares electronically during the meeting via live audio webcast by visiting https://www.cstproxy.com/dwacspac/2022. You will need the control number that is printed on your proxy card to enter the Digital World Special Meeting. Digital World recommends that you log in at least 15 minutes before the meeting to ensure you are logged in when the Digital World Special Meeting starts.

If your shares are held in “street name” through a broker, bank or other nominee, your broker, bank or other nominee will send you separate instructions describing the procedure for voting your shares. “Street name” stockholders who wish to vote at the Digital World Special Meeting will need to obtain a proxy form from their broker, bank or other nominee.

 

23


Beneficial stockholders who wish to attend the online-only virtual meeting must obtain a legal proxy by contacting their account representative at the bank, broker, or other nominee that holds their shares and e-mail a copy (a legible photograph is sufficient) of their legal proxy to proxy@continentalstock.com. Beneficial stockholders who e-mail a valid legal proxy will be issued a meeting control number that will allow them to register to attend and participate in the online-only meeting. After contacting Digital World’s transfer agent, a beneficial holder will receive an e-mail prior to the Digital World Special Meeting with a link and instructions for entering the virtual meeting. Beneficial stockholders should contact Digital World’s transfer agent at least five business days prior to the meeting date.

Stockholders will also have the option to listen to the Digital World Special Meeting by telephone by calling:

 

   

Within the U.S. and Canada: +1 800-450-7155 (toll-free)

 

   

Outside of the U.S. and Canada: +1 857-999-9155 (standard rates apply)

The passcode for telephone access: 5301963#. You will not be able to vote or submit questions unless you register for and log in to the Digital World Special Meeting webcast as described herein.

 

Q:

What will happen if I abstain from voting or fail to vote at the Digital World Special Meeting?

 

A:

At the Digital World Special Meeting, Digital World will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal or marked “WITHHOLD” with respect to the Director Election Proposal as present for purposes of determining whether a quorum is present. Abstentions will have the same effect as a vote “AGAINST” the Charter Amendment Proposals. Abstentions will have no effect on the Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal or the Adjournment Proposal. “WITHHOLD” votes will have no effect on the Director Election Proposal.

A “broker non-vote” occurs when shares held by a broker for the account of a beneficial owner are not voted for or against a particular proposal because the broker has not received voting instructions from that beneficial owner and the broker does not have discretionary authority to vote those shares in the absence of such instructions. If you do not provide instructions to your broker, your broker will not have discretionary authority to vote on any of the Proposals at the Digital World Special Meeting, because Digital World does not expect any of the Proposals to be considered a routine matter. Broker non-votes will not be counted as present for the purposes of establishing a quorum.

Broker non-votes will have the same effect as a vote “AGAINST” the Charter Amendment Proposals. Broker non-votes will have no effect on the Business Combination Proposal, the Director Election Proposal, the Incentive Plan Proposal, the Nasdaq Proposal or the Adjournment Proposal.

 

Q:

What will happen if I sign and return my proxy card without indicating how I wish to vote?

 

A:

Signed and dated proxies received by Digital World without an indication of how the stockholder intends to vote on a proposal will be voted “FOR” each proposal presented to the stockholders. The proxyholders may use their discretion to vote on any other matters which properly come before the Digital World Special Meeting.

 

Q:

If I am not going to attend the Digital World Special Meeting in person, should I return my proxy card instead?

 

A:

Yes. Whether you plan to attend the Digital World Special Meeting or not, please read this entire proxy statement/prospectus, including the annexes, carefully, and vote your shares by completing, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.

 

24


Q:

If my shares are held in “street name,” will my broker, bank or nominee automatically vote my shares for me?

 

A:

No. Under the rules of various national and regional securities exchanges, your broker, bank or nominee cannot vote your shares with respect to non-discretionary matters unless you provide instructions on how to vote in accordance with the information and procedures provided to you by your broker, bank or nominee. Digital World believes the Proposals presented to the stockholders will be considered non-discretionary and therefore your broker, bank or nominee cannot vote your shares without your instruction. Your bank, broker or other nominee can vote your shares only if you provide instructions on how to vote. You should instruct your broker to vote your shares in accordance with directions you provide.

 

Q:

May I change my vote after I have mailed my signed proxy card?

 

A:

Yes. You may change your vote by sending a later-dated, signed proxy card to Digital World’s Chief Executive Officer at the address listed below so that it is received by Digital World’s Chief Executive Officer prior to the Digital World Special Meeting or attend the Digital World Special Meeting in person and vote. You also may revoke your proxy by sending a notice of revocation to Digital World’s Chief Executive Officer, which must be received by Digital World’s Chief Executive Officer prior to the Digital World Special Meeting.

 

Q:

What should I do if I receive more than one set of voting materials?

 

A:

You may receive more than one set of voting materials, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares. If you are a holder of record and your shares are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares.

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

Digital World will pay the cost of soliciting proxies for the Digital World Special Meeting. Digital World has engaged _____ to assist in the solicitation of proxies for the Digital World Special Meeting. Digital World has agreed to pay _____ a fee of up to $_____, plus disbursements. Digital World will reimburse _____ for reasonable out-of-pocket expenses and will indemnify _____ and its affiliates against certain claims, liabilities, losses, damages and expenses. Digital World will also reimburse banks, brokers and other custodians, nominees and fiduciaries representing beneficial owners of shares of Digital World common stock for their expenses in forwarding soliciting materials to beneficial owners of the Digital World common stock and in obtaining voting instructions from those owners. Digital World’s directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person. They will not be paid any additional amounts for soliciting proxies.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the proposals or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card you should contact:

Patrick Orlando

Chief Executive Officer

78 SW 7th Street

Miami, Florida 33130

(305) 735-1517

 

25


You may also contact our proxy solicitor, _______, at: _______.

To obtain timely delivery, Digital World stockholders must request the materials no later than _______, 2022.

You may also obtain additional information about Digital World from documents filed with the SEC by following the instructions in the section titled “Where You Can Find More Information.”

If you intend to seek redemption of your Public Shares, you will need to send a letter demanding redemption and deliver your stock (either physically or electronically) to Digital World’s transfer agent prior to the Digital World Special Meeting in accordance with the procedures detailed under the question “How do I exercise my redemption rights?” If you have questions regarding the certification of your position or delivery of your stock, please contact:

Continental Stock Transfer & Trust Company

One State Street Plaza, 30th Floor

New York, New York 10004

Attn: Mark Zimkind

E-mail: mzimkind@continentalstock.com

 

26


SUMMARY OF THE PROXY STATEMENT/PROSPECTUS

This summary, together with the section titled “Questions and Answers – Questions and Answers about the Digital World Proposals,” summarizes certain information contained in this proxy statement/prospectus and may not contain all of the information that is important to you. To better understand the Business Combination and the Proposals to be considered at the Digital World Special Meeting, you should read this entire proxy statement/prospectus carefully, including the annexes. See also the section titled “Where You Can Find More Information.”

Unless otherwise indicated or the context otherwise requires, references in this Summary of the proxy statement/prospectus to the “Combined Entity” refer to Digital World and its consolidated subsidiaries after giving effect to the Business Combination, including TMTG and its subsidiaries. References to the “Company” or “Digital World” refer to Digital World Acquisition Corp. and references to “TMTG” refer to Trump Media & Technology Group Corp.

Unless otherwise specified, all share calculations assume no exercise of redemption rights by the Company’s public stockholders and do not include any shares of Digital World common stock issuable upon the exercise of the Warrants.

The Parties to the Business Combination

Digital World Acquisition Corp.

Digital World is a special purpose acquisition company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses. Digital World was incorporated under the laws of the State of Delaware on December 11, 2020.

On September 8, 2021, Digital World consummated its IPO of 28,750,000 Units, which included 3,750,000 Units issued pursuant to the full exercise by the underwriters of their over-allotment option, with each Unit consisting of one share of Class A common stock and one-half of one redeemable Warrant, with each Warrant entitling the holder thereof to purchase one share of Class A Common Stock for $11.50 per share. The Units were sold at a price of $10.00 per Unit, generating gross proceeds to Digital World of $287,500,000. Simultaneously with the closing of the IPO, Digital World completed the private sale of an aggregate of 1,133,484 Placement Units to the Sponsor at a purchase price of $10.00 per unit, generating gross proceeds of $11,334,840. A total of $293,250,000, comprised of $283,906,250 of the proceeds from the Digital World IPO (which amount includes $10,062,500 of the underwriter’s deferred discount) and $9,343,750 of the proceeds of the sale of the Placement Units, was placed in the Trust Account. Digital World’s IPO was conducted pursuant to a registration statement on Form S-1 (Registration No. 333- 256472) that became effective on September 2, 2021. Digital World Class A common stock, Units and Warrants are currently listed on Nasdaq under the symbols “DWAC”, “DWACU” and “DWACW”, respectively. The mailing address of Digital World’s principal executive offices is 78 SW 7th Street, Miami, Florida 33130, and its telephone number at such address is (305) 735-1517.

Merger Sub

Merger Sub is a wholly-owned subsidiary of Digital World, incorporated in Delaware on October 18, 2021 solely for the purpose of consummating the Business Combination. Merger Sub owns no material assets and does not operate any business.

The mailing address of Merger Sub’s principal executive offices is 78 SW 7th Street, Miami, Florida 33130, and its telephone number at such address is (305) 735-1517.

In the Business Combination, Merger Sub will merge with and into TMTG with TMTG surviving the Merger. As a result, Merger Sub will cease to exist, and TMTG will become a wholly-owned subsidiary of Digital World.

 

27


Trump Media & Technology Group Corp.

TMTG, a Delaware corporation, aspires to create a media and technology powerhouse to rival the liberal media consortium and promote free expression on all issues.

TMTG was founded to fight back against the Big Tech companies—Meta (Facebook), Twitter, Netflix, Alphabet (Google), Amazon and others—that collude to limit debate in America and silence voices that contradict their woke ideology. Twitter currently suppresses conservative speech through various means including “shadow banning”—a surreptitious process in which users may not even know their posts are being hidden from other users. The company also outright bans conservative users such as TMTG’s Chairman, former U.S. President Donald J. Trump—even while it continues to allow the Taliban to freely post their views to the world.

Big Tech’s transformation into the arbiters of public speech is contrary to American values. Their censorship of dissident expression constitutes the most serious threat today to a free and democratic debate. Thus, TMTG aims to safeguard public debate and open dialogue, and to provide a platform for all users to freely express themselves.

TMTG’s first product, TruthSocial, is a social media platform that encourages an open, free, and honest global conversation without censoring or cancelling users due to their political viewpoints. It is a public, real-time platform where any user can create content and follow other users. TMTG does not impose restrictions on whom a user can follow, which greatly enhances the breadth and depth of available content. Additionally, users can be followed by other users without requiring a reciprocal relationship, enhancing the ability of TMTG users to reach a broad audience.

TruthSocial was generally made available in the first quarter of 2022. The company prides itself on building its platform, to the best of its ability, without relying on hostile Big Tech companies. Working with alternative technology firms that share its commitment to free speech, TMTG fully launched TruthSocial for iOS on April 21, 2022, and expects to make the platform available on other desktop and mobile devices in the second quarter of 2022.

TMTG was incorporated under the laws of the State of Delaware on February 8, 2021.

The mailing address of TMTG’s principal executive offices is 401 N. Cattlemen Rd., Ste. 200, Sarasota, Florida 34232, and its telephone number at such address is (800) 798-5754.

The Proposals

THE BUSINESS COMBINATION PROPOSAL (PROPOSAL 1)

Digital World and TMTG have agreed to the Business Combination under the terms of the Agreement and Plan of Merger, dated as of October 20, 2021. This agreement, as amended by the First Amendment to the Agreement, and as it may be further amended or supplemented from time to time, is referred to in this proxy statement/prospectus as the “Merger Agreement.” Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the closing of the transactions contemplated by the Merger Agreement (the “Closing”), Merger Sub will merge with and into TMTG, with TMTG continuing as the surviving entity and becoming a wholly-owned subsidiary of Digital World (the “Merger”). See the section titled “The Business Combination Proposal.”

Merger Consideration

Subject to the terms and conditions set forth in the Merger Agreement, at the Effective Time:

 

  (a)

the outstanding shares of Class A common stock, par value $0.0001 per share, of Digital World (“Digital World Class A common stock”), including any shares of Class B common stock, par value

 

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  $0.0001 per share, of Digital World (“Digital World Class B common stock”, and together with the Digital World Class A common stock, the “Digital World common stock”) all of which will be converted into Digital World Class A common stock in accordance with Digital World’s amended and restated certificate of incorporation (the “Digital World Charter”), will be redesignated as common stock, par value $0.0001 per share, of Trump Media & Technology Group Corp. (which will be the new name of Digital World after the Closing, as described below, “New Digital World”) (referred to herein as “New Digital World common stock”);

 

  (b)

As consideration for the Merger, the TMTG securityholders as of immediately prior to the Effective Time (“TMTG securityholders”), shall be entitled to receive from Digital World, a number of shares of New Digital World common stock in an amount equal to $875,000,000, subject to adjustments for TMTG’s closing debt, net of cash, and unpaid transaction expenses (the “Merger Consideration”), plus the additional contingent right to receive the Earnout Shares (as defined below) after the Closing, provided that it shall exclude any additional shares issuable upon conversion after the Closing of certain TMTG convertible notes, as described below, and upon the Merger (i) all of the issued and outstanding capital stock of TMTG immediately prior to the Effective Time (other than those properly exercising any applicable appraisal rights under Delaware law) will automatically be cancelled and shall cease to exist, in exchange for the right to receive pro rata shares of the aggregate Merger Consideration to be paid to the TMTG stockholders as of immediately prior to the Effective Time, (ii) each outstanding option to acquire shares of TMTG common stock (whether vested or unvested) will be assumed by Digital World and automatically converted into an option to acquire shares of New Digital World common stock, with its price and number of shares equitably adjusted based on the conversion ratio of the shares of TMTG common stock into the Merger Consideration, and (iii) each outstanding restricted stock unit of TMTG shall be converted into a restricted stock unit relating to shares of New Digital World common stock, as provided in the Merger Agreement and as more particularly described in the notice; and

 

  (c)

the TMTG stockholders will also have a contingent right to receive up to an aggregate of an additional 40,000,000 shares of New Digital World common stock (the “Earnout Shares”) after the Closing based on the price performance of the New Digital World common stock during the three (3) year period following the Closing (the “Earnout Period”). The Earnout Shares shall be earned and payable during the Earnout Period as follows:

 

   

if the dollar volume-weighted average price (“VWAP”) of New Digital World common stock equals or exceeds $15.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an additional 15,000,000 Earnout Shares;

 

   

if the VWAP of New Digital World common stock equals or exceeds $20.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an additional 15,000,000 Earnout Shares; and

 

   

if the VWAP of New Digital World common stock equals or exceeds $30.00 per share for any 20 trading days within any 30 trading day period, Digital World shall issue to the TMTG stockholders an additional 10,000,000 Earnout Shares.

The Merger Consideration will be subject to a post-Closing true up 90 days after the Closing.

Escrow Shares

At the Closing, a number of shares of Purchaser Common Stock equal to the quotient obtained by dividing (i) five percent (5%) of the initial Merger Consideration (meaning $875,000,000) (as determined on the Closing Date) by (ii) the Purchaser Share Price (the “Escrow Amount”) (together with any equity securities paid as dividends or distributions with respect to such shares or into which such shares are exchanged or converted, the “Escrow Shares”) otherwise issuable to the TMTG stockholders (allocated pro rata among the TMTG

 

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stockholders based on the Merger Consideration otherwise issuable to them at the Closing) will be deposited into a segregated escrow account with Continental Stock Transfer & Trust Company (or such other escrow agent reasonably acceptable to Digital World and TMTG), as escrow agent, and held in escrow together with any dividends, distributions or other income on the Escrow Shares (the “Escrow Property”) in accordance with an escrow agreement to be entered into in connection with the Business Combination (the “Escrow Agreement”). The Escrow Property will be held in the escrow account for a period of twelve (12) months after the Closing as the sole and exclusive source of payment for any post-Closing purchase price adjustments and indemnification claims (other than fraud claims). The TMTG stockholders will have the right to vote the Escrow Shares while they are held in escrow.

Merger Closing Conditions

The Merger Agreement is subject to customary conditions to the Closing. In addition, the Closing is subject to the following additional conditions (amongst others): (i) the approval of the Merger Agreement and the Business Combination by the requisite vote of Digital World’s stockholders and TMTG’s stockholders, (ii) Digital World having at least $5,000,001 in net tangible assets, after giving effect to the completion of its redemption of public stockholders who redeem their shares in connection with the Business Combination, (iii) the election or appointment of members to the Combined Entity’s board of directors immediately after the Closing in accordance with the Merger Agreement, (iv) the effectiveness of the registration statement of which this proxy statement/prospectus forms a part, (v) the conditional approval of the Combined Entity’s initial listing application with Nasdaq with respect to the common stock to be issued pursuant to the Business Combination, and (vi) Digital World having cash and cash equivalents, including funds remaining in the Trust Account (after giving effect to the completion and payment of the Redemption) and the proceeds of any PIPE Investment, of at least equal to Sixty Million U.S. Dollars ($60,000,000).

In addition, unless waived by TMTG, the obligations of TMTG to consummate the Business Combination are subject to the fulfillment of certain closing conditions, including but not limited to the following (in addition to customary certificates and other closing deliverables):

 

   

The representations and warranties of Digital World being true and correct as of the date of the Merger Agreement and as of the Closing (subject to Material Adverse Effect (as defined below) with respect to Digital World);

 

   

Digital World having performed in all material respects their respective obligations and complied in all material respects with their respective covenants and agreements under the Merger Agreement required to be performed or complied with on or prior to the date of the Closing; and

 

   

TMTG having received a copy of a duly executed Escrow Agreement by Digital World.

Unless waived by Digital World, the obligations of Digital World and the Merger Sub to consummate the Business Combination are subject to the satisfaction of the following conditions (in addition to customary certificates and other closing deliverables):

 

   

The representations and warranties of TMTG being true and correct as of the date of the Merger Agreement and as of the Closing (subject to Material Adverse Effect);

 

   

TMTG having performed in all material respects its obligations and complied in all material respects with its covenants and agreements under the Merger Agreement required to be performed or complied with on or prior to the date of the Closing;

 

   

Absence of a Material Adverse Effect with respect to TMTG since the date of the Merger Agreement that is continuing and uncured;

 

   

TMTG and the TMTG securityholders specified therein having executed and delivered the Escrow Agreement (as described below);

 

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TMTG shall have converted, terminated, extinguished and cancelled in full any outstanding TMTG Convertible Securities or commitments therefor, other than the TMTG options and the TMTG Restricted stock units;

 

   

Non-competition Agreements (as described below) having been have been executed and delivered;

 

   

Lock-Up Agreement (as described below) having been have been executed and delivered; and

Digital World shall have received a duly executed legal opinion from the TMTG’s counsel.

Merger Structure

Pursuant to the Merger Agreement, upon the Closing, Merger Sub, a wholly-owned subsidiary of Digital World, will be merged with and into TMTG, with TMTG continuing as the surviving entity of the Merger and becoming a wholly-owned subsidiary of Digital World. See “The Business Combination Proposal — General Description of the Merger Agreement” and “The Business Combination Proposal — Merger Consideration.”

Covenants

Each party to the Merger Agreement has agreed to use its reasonable best efforts to effect the Closing. The Merger Agreement also contains certain customary covenants by each of the parties during the period between the signing of the Merger Agreement and the earlier of the Closing or the termination of the Merger Agreement in accordance with its terms (the “Interim Period”), including, but not limited to covenants regarding (i) the provision of access to their offices, properties, books and records, (ii) the operation of their respective businesses in the ordinary course of business, (iii) provision of financial statements by TMTG; (iv) filing by Digital World of its reports required by the Exchange Act, and efforts regarding Nasdaq listing requirements, (v) no solicitation of other competing transactions, (vi) no trading in Digital World’s securities by TMTG using Digital World’s material non-public information, (vii) notifications of certain breaches, consent requirements or other matters, (viii) efforts to obtain third party and regulatory approvals and comply with all government authority requirements, (ix) further assurances to cooperate, (x) a requirement for TMTG to promptly hold its stockholder meeting or otherwise obtain the written consent of its stockholders to approve the Merger Agreement and related transactions, (xi) tax matters and transfer taxes, (xii) public announcements, (xiii) confidentiality, (xiv) post-Closing Digital World board of directors and executive officers and (xv) payment of extension expenses There are also certain customary post-Closing covenants regarding (i) maintenance of books and records; (ii) indemnification of directors and officers; and (iii) use of Trust Account proceeds.

Pursuant to the Merger Agreement, Digital World agreed to file a Registration Statement on Form S-4 with respect to the issuance of the Merger Consideration Shares to the TMTG securityholders, which will contain a proxy statement/prospectus for a special meeting of Digital World’s stockholders to consider the Merger Agreement and the related transactions and matters, including the Required Proposals described herein.

TMTG agreed that the ownership and position of its principal would be structured in such a way as to eliminate the need for restructuring of such ownership or the requirement to make changes in position of the principal upon the occurrence of certain specified material disruptive events.

Termination

The Merger Agreement may be terminated under certain customary and limited circumstances at any time prior to the Closing, including among other reasons, (i) by mutual consent of TMTG and Digital World, (ii) by either Digital World or TMTG if any of the conditions to the Closing have not been satisfied or waived by September 20, 2022 (the “Outside Date”), provided that the Outside Date may be extended if Digital World obtains one or more extensions of the time it has to consummate its initial business combination, provided further that this termination right shall not be available to Digital World or TMTG if the breach by such party (i.e., either

 

31


Digital World or Merger Sub on one hand, or TMTG, on the other hand) of the Merger Agreement was the cause of, or resulted in, the failure of the Closing to occur on or before the Outside Date, (iii) by either Digital World or TMTG if a governmental authority of competent jurisdiction shall have issued an order or taken any other action permanently restraining, enjoining or otherwise prohibiting, or if any law is in effect making illegal, the transactions contemplated by the Merger Agreement, (iv) by either Digital World or TMTG for the other party’s uncured breach (subject to certain materiality qualifiers and cure periods), (v) by Digital World if there has been an event after the signing of the Merger Agreement that has a Material Adverse Effect on TMTG (but excluding a qualifying settlement of certain litigation in which TMTG is involved) that is uncured and continuing, (vi) by TMTG if there has been an event after the signing of the Merger Agreement that has a Material Adverse Effect on Digital World that is uncured and continuing, (vii) by either Digital World or TMTG if approval for the Business Combination and the other Required Proposals are not obtained at the Digital World Special Meeting, (viii) by either Digital World or TMTG if a special meeting of TMTG’s stockholders is held and TMTG’s stockholder shall not have approved the Merger Agreement and the Business Combination and related matters and (ix) by the mutual and reasonable written consent of Digital World and TMTG in the event that that any required approval of the SEC or any other governmental authority cannot be obtained by the Outside Date, as such date may be extended by an extension.

TMTG and Digital World agreed that in the event that the Merger Agreement is terminated prior to Closing for any reason. that during period commencing on such termination date and ending twelve (12) calendar months after the termination date, TMTG shall not engage in or enter into an agreement with respect to (i) an alternative transaction with a special purpose acquisition company other than Digital World or (ii) a going public transaction.

Executive Officers and Directors of the Combined Entity

The following persons are expected to be elected or appointed by the Digital World board to serve as executive officers and directors of the Combined Entity following the Business Combination. For biographical information concerning the executive officers and directors following the Business Combination, see “Management after the Business Combination — Management and Board of Directors”.

 

Name

   Age     

Position(s)

President Donald J. Trump

     75      Chairman of the Board (2)

Devin G. Nunes

     48      Chief Executive Officer

Phillip Juhan

     47      Chief Financial Officer

Andrew Northwall

     35      Chief Operating Officer

William (B.J.) Lawson

     48      Chief Technology Officer
      Director (1)
      Independent Director (1)
      Independent Director (2)
      Independent Director (2)
      Independent Director (2)

 

(1)

Digital World Designee

(2)

TMTG Designee.

Interests of TMTG’s and Digital World’s Directors and Officers in the Business Combination

When you consider the recommendation of Digital World Board in favor of approval of the Business Combination Proposal and the other proposals, you should keep in mind that the directors and executive officers of Digital World and of TMTG have interests in the Business Combination and other proposals that may be different from, or in addition to, those of Digital World stockholders generally. These interests include, among other things, the fact that certain of TMTG’s directors and officers will become directors and officers of the

 

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Combined Entity, and certain of Digital World’s directors and officers will become directors of the Combined Entity, upon the consummation of the Business Combination.

Please see the sections entitled “Risk Factors” and “The Business Combination Proposal — Interests of TMTG’s Directors and Officers in the Business Combination” and “The Business Combination Proposal — Interests of Digital World’s Directors and Officers in the Business Combination” of this proxy statement/prospectus for a further discussion of this and other risks.

Classified Board of Directors

The Combined Entity’s board of directors will consist of seven (7) members upon the closing of the Business Combination. In accordance with the Amended Charter to be filed immediately after the consummation of the Business Combination, the board of directors will be divided into three classes, Classes I, II and III, each to serve a three-year term, except for the initial term after the Closing, for which the Class I directors will be up for reelection at the first annual meeting of stockholders occurring after the Closing, and for which the Class II directors will be up for reelection at the second annual meeting of stockholders occurring after the Closing. At each annual meeting of stockholders of the Combined Entity, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following the election. Directors will not be able to be removed during their term except for cause. Digital World and TMTG will work in good faith to equitably allocate director designees among the three classes of directors, provided that Digital World’s designees will serve in the class of directors with the latest initial re-election date.

It is expected that that any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of the Combined Entity’s board of directors into three classes with staggered three-year terms may delay or prevent a change of the Combined Entity’s management or a change in control.

Digital World’s Reasons for the Business Combination

The Digital World Board, in evaluating the Business Combination, consulted with Digital World’s management and its financial and legal advisors. In reaching its unanimous resolution (i) that the Merger Agreement and the transactions contemplated thereby, including the Business Combination and the issuance of shares of common stock in connection therewith, are advisable and in the best interests of Digital World and (ii) to recommend that the Digital World stockholders adopt the Merger Agreement and approve the Business Combination and the other transactions contemplated by the Merger Agreement, the Digital World Board considered a range of factors, including, but not limited to, the factors discussed below.

In light of the number and wide variety of factors considered in connection with its evaluation of the Business Combination, the Digital World Board did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors that it considered in reaching its determination and supporting its decision. The Digital World Board viewed its decision as being based on any and all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors. This explanation of Digital World’s reasons for the Business Combination and all other information presented in this section may be forward-looking in nature and, therefore, should be read in light of the factors discussed under “Cautionary Note Regarding Forward-Looking Statements.” Many factors were considered by Digital World, and the factors outlined herein may or may not have been considered by any particular directors, member of management, or advisor of Digital World. Notwithstanding whether any of these factors were considered by any individual board member, the Board voted unanimously to proceed with the transaction.

The officers and directors of Digital World have substantial experience in evaluating the operating and financial merits of companies from a wide range of industries and concluded that their experience and

 

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background, together with experience and sector expertise of Digital World’s advisors, enabled them to make the necessary analyses and determinations regarding the Business Combination.

The Digital World Board considered a number of factors pertaining to the Business Combination as generally supporting its decision to enter into the Merger Agreement and the transactions contemplated thereby, including, but not limited to, the following material factors:

• Brand and Growth Prospects. Analytical data suggests that the consumer base is receptive to seeking alternative media sources, especially those differentiated from the current market offerings. Surveys have shown potential for a large adoption of media platforms associated with President Trump as legacy social media companies are seen to censor political speech. As the U.S. population continues to “cut the cord” that tethers devices to traditional cable and media companies, content and content distribution is becoming the key driving force behind capturing and retaining customers. TMTG’s plans to commence their operations in the Social Media and video on demand (“VOD”) space hold significant potential growth for TMTG. After decades of growth and consolidation in the media and technology sectors; the users, creators and consumers of content can often feel there are fewer and fewer differentiated choices when looking at platforms they can choose to consume, create and distribute selected content and TMTG may successfully offer a differentiated choice.

The Digital World Board believes that TMTG, if properly capitalized, is very well positioned to grow a user base at an accelerated pace. In 2004 when Facebook launched, it obtained an estimated 1 million users within the first year. It then took an estimated three years to break through the 10 million user mark. The Digital World Board believed that management of TMTG was positioned to exceed this initial growth trajectory due to President Trump and his established social media following of over 200 million followers across multiple social media platforms and TMTG’s marketing proposition.

Broad and Diverse User Base. TMTG has a broad potential user base with demonstrated brand awareness, brand loyalty and eagerness to seek out change while making choices of where to spend their media dollars and attention. We believe that as TMTG management works to broaden TMTG’s brand appeal, this will materially widen the field of potential customers and users the media platform can attract;

Due Diligence. Due diligence examinations of TMTG and discussions with TMTG’s management team and Digital World’s legal advisors during Digital World’s due diligence examination of TMTG have led Digital World to deem that TMTG has assembled the elements to create the foundation for a potentially very successful media and technology company;

Stockholder Liquidity. The obligation in the Merger Agreement to have the Digital World common stock issued as Merger Consideration continue to be listed on Nasdaq, a major U.S. stock exchange, which the Digital World Board believes has the potential to offer stockholders enhanced liquidity;

Financial Information and Comparable Company Analysis. The Digital World Board also considered factors related to TMTG’s financial outlook. In connection with Digital World’s review of the Business Combination, TMTG provided Digital World’s management with its internal financial analysis model. Although Digital World’s board received certain financial projections included in TMTG’s financial model, it did not rely on these financial projections as a determinative factor in its decision to enter into the Business Combination Agreement.

Evaluating real world growth and financial projections related to a rapid growth company in a competitive industry can be challenging; the Board recognized that a properly capitalized technology company in the media and technology space should instead have a primary focus of user acquisition during its initial growth stages. This may initially hamper EBITDA and even topline revenues. However, the Board believes that if management of TMTG is successful in the user acquisition phase, this will ultimately drive the key performance indicators that are directly correlated to revenue and cash flow.

An additional financial consideration was management’s ability to attract sufficient pre-revenue capital investment to fuel user acquisition efforts. As of the October 2021 execution of the Merger Agreement, TMTG

 

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had already raised over $5 million in its first months of inception. The Digital World Board reviewed TMTG’s current prospects for user acquisition in its business plan. In reviewing these factors, the Digital World Board noted that TMTG’s brand recognition and President Trump’s strong social media following would well position the company to gain market share and expand its user base at an accelerated pace; allowing for a more rapid transition of focus to revenue expansion that benefits long-term EBITDA margin.

Digital World’s management, in consultation with EF Hutton, division of Benchmark Investments, LLC and representative to the underwriters in Digital World’s IPO (“EF Hutton”), acting solely in its capacity as placement agent to Digital World in connection with the PIPE, reviewed certain financial and operating information of certain publicly traded companies (the “Trading Comparables”), particularly, similar social media, content production and distribution, and media companies around the world. The selected companies included a group of companies operating in various global markets, including, among others Twitter, Facebook (now known as Meta), Netflix, and Snapchat. None of the Trading Comparables has characteristics identical to TMTG. The Trading Comparables were selected because of their similarities to the potential offerings to be provided by TMTG.

At the time of review, the median enterprise value of the Trading Comparables available exceeded $324 billion. More specifically, the enterprise value of the most direct competitor to TMTG’s first product, TruthSocial, was $41 billion. Therefore, Digital World’s management believed that $875 million with a potential earnout of an additional $825 million was a reasonable estimate of TMTG’s enterprise valuation and applied it to the business combination transaction.

Digital World’s management also reviewed the financial projection assumptions and revenue projections for TMTG’s first product, TruthSocial, including projections of total users, monetizable users, and average revenue per user, and TMTG+, including total subscribers and potential pricing models.

Experienced Management Team. TMTG has a strong management team with significant experience.

Lock-Up. Key stockholders of TMTG (including its management team) agreed to be subject to a six-month lockup in respect of their Digital World common stock, subject to certain customary exceptions, which would provide important stability to the leadership and governance of TMTG;

Other Alternatives. The Digital World Board believes, after a thorough review of other business combination opportunities reasonably available to Digital World, that the proposed Business Combination represents the best potential business combination for Digital World and the most attractive opportunity based upon the process utilized to evaluate and assess other potential acquisition targets. Given the potential number of users and accelerated adoption of TruthSocial, as well as the additional business verticals in development, including TMTG+, the Digital World Board believed TMTG offers its shareholders the most potential value when compared to other target candidates.

Negotiated Transaction. The financial and other terms of the Merger Agreement and the fact that such terms and conditions are reasonable and were the product of arm’s length negotiations between Digital World and TMTG.

The Digital World Board also considered a variety of uncertainties and risks and other potentially negative factors concerning the Business Combination including, but not limited to, the following:

Macroeconomic Risks. Macroeconomic uncertainty, including the potential impact of the COVID-19 pandemic, and the effects it could have on TMTG’s revenues post-closing;

Business Plan and Projections May Not Be Achieved. The risk that TMTG may not be able to execute on the business plan, including but not limited to its rollout of TruthSocial and TMTG+, and realize the financial performance as set forth in the financial projections, in each case, presented to Digital World’s management team and board of directors;

Redemption Risk. The potential that a significant number of Digital World stockholders elect to redeem their shares prior to the consummation of the Business Combination and pursuant to Digital World’s Existing Charter, which would potentially make the Business Combination more difficult or impossible to complete;

 

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Stockholder Vote. The risk that Digital World’s stockholders may fail to provide the respective votes necessary to affect the Business Combination;

Closing Conditions. The fact that the completion of the Business Combination is conditioned on the satisfaction of certain closing conditions that are not within Digital World’s control;

Litigation. The possibility of litigation challenging the Business Combination or that an adverse judgment granting permanent injunctive relief could indefinitely enjoin consummation of the Business Combination;

Listing Risks. The challenges associated with preparing TMTG, a private entity, for the applicable disclosure and listing requirements to which TMTG will be subject as a publicly traded company on the Nasdaq;

Benefits May Not Be Achieved. The risks that the potential benefits of the Business Combination may not be fully achieved or may not be achieved within the expected timeframe;

Liquidation of Digital World. The risks and costs to Digital World if the Business Combination is not completed, including the risk of diverting management focus and resources from other business combination opportunities, which could result in Digital World being unable to effect a business combination by the Outside Date;

Growth Initiatives May Not be Achieved. The risk that TMTG’s growth initiatives may not be fully achieved or may not be achieved within the expected timeframe;

Board and Independent Committees. The risk that TMTG’s board of directors post-Closing and independent committees do not possess adequate skills set within the context of TMTG operating as a public company;

No Third-Party Valuation. The risk that Digital World did not obtain a third-party valuation in connection with the Business Combination;

Digital World Stockholders Receiving a Minority Position in TMTG. The risk that Digital World stockholders will hold a minority position in TMTG;

Fees and Expenses. The fees and expenses associated with completing the Business Combination; and

Other Risk Factors. Various other risk factors associated with the business of TMTG, as described in the section entitled “Risk Factors” appearing elsewhere in this proxy statement/prospectus.

The above discussion of the material factors considered by the Digital World Board is not intended to be exhaustive, but does set forth the principal factors considered by the Digital World Board.

The Digital World Board concluded that the potential benefits expected to be achieved by Digital World and its stockholders resulting from the Business Combination outweighed the potentially negative factors associated with the Business Combination. Accordingly, the Digital World Board determined that the Business Combination was advisable, fair to, and in the best interests of, Digital World and its shareholders.

Accounting Treatment

The Business Combination is expected to be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Digital World will be treated as the acquired company and TMTG will be treated as the acquirer for financial statement reporting purposes. See section entitled “The Business Combination Proposal — Anticipated Accounting Treatment.”

No Delaware Appraisal Rights for Digital World Stockholders

Appraisal rights are statutory rights under the DGCL that enable stockholders who object to certain extraordinary transactions to demand that the corporation pay such stockholders the fair value of their shares

 

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instead of receiving the consideration offered to stockholders in connection with the extraordinary transaction. However, appraisal rights are not available in all circumstances. Appraisal rights are not available to Digital World stockholders or Warrant holders in connection with the Business Combination.

Impact of the Business Combination on Digital World’s Public Float

It is anticipated that, upon the completion of the Business Combination, and prior to the PIPE, Digital World’s public stockholders will retain an ownership interest of approximately 23.7% of the outstanding capital stock of the Combined Entity, the Sponsor will retain an ownership interest of approximately 6.2% of the outstanding capital stock of the Combined Entity and the TMTG securityholders will own approximately 70.1% of the outstanding capital stock of the Combined Entity. The PIPE Investors will purchase up to an aggregate of 1,000,000 shares of Digital World’s Series A Preferred Stock, initially convertible into 29,761,905 shares of common stock, subject to upward adjustment as described herein, or, assuming full conversion at the initial conversion price, approximately 19.0% of the outstanding New Digital World Common Stock. As a result, and giving effect to the PIPE and assuming immediate and full conversion of the Preferred Stock, Digital World’s public stockholders will retain an ownership interest of approximately 19.2% of the outstanding capital stock of the Combined Entity, the Sponsor will retain an ownership interest of approximately 5.1% of the outstanding capital stock of the Combined Entity and the TMTG securityholders will own approximately 56.7% of the outstanding capital stock of the Combined Entity. The foregoing ownership percentages with respect to the Combined Entity following the Business Combination exclude any outstanding Warrants and assume that (i) there are no redemptions of any shares by Digital World’s public stockholders in connection with the Business Combination, (ii) no awards are issued under the Equity Incentive Plan and (iii) no Working Capital Units or Extension Units are issued. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by Digital World’s existing stockholders in the Combined Entity will be different. Upon consummation of the Business Combination, and subject to approval of the Incentive Plan Proposal, TMTG’s executive officers are expected to receive grants of stock options and restricted stock units under the Equity Incentive Plan from time to time as determined by the Compensation Committee. In addition, the outstanding TMTG Options and TMTG RSUs granted to TMTG’s executive officers and certain members of the TMTG Board under the TMTG 2022 Plan prior to the Closing of the Business Combination will be assumed and converted to options and RSUs under the Equity Incentive Plan effective as of the Closing the Business Combination.

The following table illustrates varying ownership levels in the Combined Entity, assuming the factors mentioned above, and excluding the exercise of above-mentioned Warrants or the issuance of shares of common stock upon conversion of the Preferred Stock, in the event of (i) no redemptions, and (ii) maximum redemptions of 28,750,000 public shares:

 

     Assuming No Redemption
(0% Public Shares Redeemed, or
$293,250,000 remaining in trust)
     Assuming Max Redemption
(100% Public Shares Redeemed, or
$0 remaining in trust)
 

Stockholder

   % Ownership     Shares      % Ownership     Shares  

TMTG

     70.1     88,948,023        90.6     88,948,023  

Public

     23.7     30,027,234        1.3     1,277,234  

Sponsor (including % of Digital World’s directors and officers)

     6.2     7,931,548        8.1     7,931,548  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

     100     126,906,805        100     98,156,805  
  

 

 

   

 

 

    

 

 

   

 

 

 

THE CHARTER AMENDMENT PROPOSALS (PROPOSALS 2 THROUGH 6)

To approve and adopt a second amendment and restatement of the Digital World Charter, as set out in the draft second amended and restated version of Digital World’s certificate of incorporation appended to this proxy

 

37


statement/prospectus as Annex B (the “Amended Charter”), for the following amendments (collectively, the “Charter Amendment Proposals”) to:

 

  (A)

Name Change– To provide that the name of Digital World shall be changed to “Trump Media & Technology Group Corp.” (Proposal 2).

 

  (B)

Board Structure and Composition – To provide for the structure of the Board, split into three classes of as even size as practicable, Class I, II, and III, each to serve a term of three years, except for the initial term, for which the Class I directors will be up for reelection at the first annual meeting of stockholders occurring after the Closing, for which the Class II directors will be up for reelection at the second annual meeting of stockholders occurring after the Closing and for which the Class III directors will be up for reelection at the third annual meeting of stockholders occurring after the Closing. Directors will not be able to be removed during their term except for cause. The size of the Board shall be determined by resolution of the Board but will initially be seven (7) (Proposal 3).

 

  (C)

Amendment of Blank Check Provisions – To remove and change certain provisions in the Digital World Charter related to Digital World’s status as a special purpose acquisition company, including the deletion of Article IX of the Digital World Charter in its entirety (Proposal 4).

 

  (D)

The Authorized Share Charter Amendment – To increase the number of authorized shares of common stock and preferred stock to accommodate the shares to be issued in the PIPE Investment and upon conversion of the preferred stock issued in the PIPE Investment (Proposal 5); and

 

  (E)

Amendment and Restatement of the Digital World Charter – Conditioned upon the approval of Proposals 2 through 4, a proposal to approve the Amended Charter in the form attached as Annex B hereto, which includes the approval of all other changes in the proposed Amended charter in connection with replacing the Digital World Charter with the proposed Amended Charter as of the Effective Time (Proposal 6).

THE DIRECTOR ELECTION PROPOSAL (PROPOSAL 7)

To consider and vote upon a proposal to elect seven (7) directors to serve on the Company’s board of directors effective from the consummation of the Business Combination. If the nominees identified in this proxy statement/prospectus are elected,                  and                  will be Class I directors, serving until the Combined Entity’s 2023 annual meeting of stockholders;                  and                  will be Class II directors, serving until the Combined Entity’s 2024 annual meeting of stockholders; and                 ,                  and                  will be Class III directors, serving until the Combined Entity’s 2025 annual meeting of stockholders, and in each case, until their respective successors are duly elected and qualified.

THE INCENTIVE PLAN PROPOSAL (PROPOSAL 8)

The proposed Equity Incentive Plan will reserve a number of shares of New Digital World common stock equal to 7.5% of the fully diluted, and as converted, amount of New Digital World common stock to be outstanding following consummation of the Business Combination, or                  shares, for issuance as awards in accordance with the terms of the Equity Incentive Plan. The purpose of the Equity Incentive Plan is to assist in attracting, retaining, motivating, and rewarding certain key employees, officers, directors, and consultants of New Digital World and its affiliates and promoting the creation of long-term value for stockholders of New Digital World by closely aligning the interests of such individuals with those of other stockholders. The Equity Incentive Plan authorizes the award of share-based incentives to encourage eligible employees, officers, directors, and consultants, as described below, to expend maximum effort in the creation of stockholder value.

A summary of the Equity Incentive Plan is set forth in the “The Incentive Plan Proposal” section of this proxy statement/prospectus and a complete copy of the Equity Incentive Plan is attached hereto as Annex C. You are encouraged to read the Equity Incentive Plan in its entirety.

 

38


THE NASDAQ PROPOSAL (PROPOSAL 9)

To consider and vote upon a proposal to approve, for purposes of complying with Nasdaq Listing Rule 5635, (a) the issuance of 85,784,314 newly issued shares of common stock in the Business Combination, which amount will be determined as described in more detail in the accompanying proxy statement/prospectus, (b) the issuance of up to 29,761,905 shares of common stock in connection with the PIPE Investment, subject to adjustment as described in more detail in the accompanying proxy statement/prospectus, (c) the issuance of up to _______ shares of common stock underlying Working Capital Units issuable upon conversion of any convertible notes of Digital World that may be issued to Digital World’s sponsor or its affiliates, and (d) the issuance of up to              shares of common stock issuable upon conversion after the Closing of outstanding convertible notes of TMTG in connection with the consummation of the Business Combination.

THE ADJOURNMENT PROPOSAL (PROPOSAL 10)

Digital World is proposing that its stockholders approve and adopt a proposal to adjourn the Digital World Special Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if, based upon the tabulated vote at the time of the Digital World Special Meeting, there are not sufficient votes to approve the other Proposals.

Date, Time and Place of Digital World Special Meeting

The Digital World Special Meeting will be held virtually at 10:00 a.m., Eastern Time, on ___________, 2022, or at such other date and time to which such meeting may be adjourned or postponed, to consider and vote upon the Proposals. Due to concerns about the coronavirus (COVID-19) and warnings from public officials regarding public gatherings, we will hold the Digital World Special Meeting solely by means of remote communication.

Proxy Solicitation

Proxies may be solicited by telephone, by facsimile, by mail, on the Internet or in person. We have engaged __________ to assist in the solicitation of proxies. If a stockholder grants a proxy, it may still vote its shares in person if it revokes its proxy before the Digital World Special Meeting. A stockholder may also change its vote by submitting a later-dated proxy, as described in the section titled “Digital World Special Meeting — Revoking Your Proxy.”

Quorum and Required Vote for Stockholder Proposals

A quorum of Digital World stockholders is necessary to hold a valid meeting. A quorum will be present at the Digital World Special Meeting if a majority of the Digital World common stock issued and outstanding and entitled to vote at the Digital World Special Meeting is represented in person or by proxy at the Digital World Special Meeting. Abstentions and “WITHHOLD” votes will count as present for the purposes of establishing a quorum. Broker non-votes will not be counted for purposes of establishing a quorum.

The approval of the Charter Amendment Proposals requires the affirmative vote of a majority of the issued and outstanding Digital World common stock as of the Record Date. Accordingly, a Digital World stockholder’s failure to vote by proxy or to vote in person at the Digital World Special Meeting or an abstention will have the same effect as a vote “AGAINST” the Charter Amendment Proposals.

The approval of Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal and the Adjournment Proposal each require the affirmative vote of the holders of a majority of the shares of Digital World common stock cast by the stockholders represented in person or by proxy and entitled to vote thereon at the Digital World Special Meeting. A Digital World stockholder’s failure to vote by proxy or to vote in person at

 

39


the Digital World Special Meeting or an abstention will have no effect on the outcome of the vote on Business Combination Proposal, the Incentive Plan Proposal, the Nasdaq Proposal and Adjournment Proposal.

The approval of the Director Election Proposal requires a plurality vote of the shares of Digital World common stock cast by the stockholders represented in person or by proxy and entitled to vote thereon at the Digital World Special Meeting. A Digital World stockholder’s failure to vote by proxy or to vote in person at the Digital World Special Meeting or a “WITHHOLD” vote will no effect on the Director Election Proposal.

The Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal, are conditioned on the approval of the Business Combination Proposal (and the Business Combination Proposal is conditioned on the approval of the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal), and unless the Business Combination Proposal is approved, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal will not be presented to the stockholders of Digital World at the Digital World Special Meeting. The Adjournment Proposal is not conditioned on any other Proposal and does not require the approval of any other Proposal to be effective. It is important for you to note that in the event the Business Combination Proposal, the Charter Amendment Proposals, the Director Election Proposal, the Incentive Plan Proposal and the Nasdaq Proposal do not receive the requisite vote for approval, then Digital World will not consummate the Business Combination. If Digital World does not consummate the Business Combination and fails to complete an initial business combination by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate an initial business combination), it will be required to dissolve and liquidate its Trust Account by returning the then remaining funds in such account to its public stockholders, unless it seeks and obtains the approval of Digital World stockholders to amend the Digital World Charter to extend such date.

Recommendation to Digital World Stockholders

Digital World Board believes that the Proposals to be presented at the Digital World Special Meeting are in the best interests of Digital World and its stockholders and unanimously recommends that Digital World stockholders vote “FOR” the Proposals.

When you consider the recommendation of Digital World Board in favor of approval of these Proposals, you should keep in mind that Digital World directors and officers have interests in the Business Combination that may be different from or in addition to (and which may conflict with) your interests as a stockholder. These interests include, among other things, the fact that:

 

   

unless Digital World consummates an initial business combination, Digital World’s officers and directors and the Sponsor will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the Trust Account;

 

   

the Sponsor and directors and officers of Digital World paid an aggregate of $25,000 for their Founder Shares and such securities will have a significantly higher value at the time of the Business Combination. Such shares, including the shares underlying the units, had an aggregate market value of approximately $357.22 million based upon the closing price of Digital World’s common stock of $64.51 per share on Nasdaq on March 31, 2022;

 

   

as a condition to the Digital World IPO, the Founder Shares became subject to a lock-up whereby, subject to certain limited exceptions, the Founder Shares cannot be transferred until the earlier of (A) six months after the completion of Digital World’s initial business combination; (B) subsequent to Digital World’s initial business combination, when the reported last sale price of the Class A common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after Digital World’s initial business combination; and (C) such date after its initial business combination on which Digital World completes a liquidation, merger, stock exchange,

 

40


 

reorganization or other similar transaction that results in all of the Digital World stockholders having the right to exchange their shares of Digital World common stock for cash, securities or other property;

 

   

an aggregate of 1,133,484 Placement Units were issued to the Sponsor simultaneously with the consummation of the IPO and the underwriters’ exercise of its over-allotment option. Such units had an aggregate market value of approximately $85.51 million based upon the closing price of Digital World’s units of $75.44 per unit on Nasdaq on March 31, 2022;

 

   

the Sponsor has agreed that the Placement Units, and all of their underlying securities, will not be sold or transferred by it until 30 days after Digital World has completed a business combination, subject to limited exceptions;

 

   

the Sponsor and directors and officers of Digital World have agreed not to redeem any shares of Digital World common stock they hold in connection with a stockholder vote to approve a proposed initial business combination;

 

   

the Sponsor may loan to Digital World additional funds for working capital purposes prior to the Business Combination. There are no working capital loans from the Sponsor currently outstanding. If the Business Combination is not consummated and Digital World does not otherwise consummate another business combination prior to September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), then there will likely be insufficient funds to pay the working capital loans;

 

   

at the Sponsor’s discretion, $2,875,000 may be loaned by the Sponsor or its affiliates or designees for each three-month extension (for up to $5,750,000) of the time that Digital World has to consummate a business combination, which amount may be converted into Extension Units, at the price of $10.00 per unit. Such units would be identical to the Placement Units;

 

   

Pursuant to the PIPE Waiver Letter, if the Business Combination is consummated, Digital World’s Initial Stockholders shall receive an aggregate of 744,048 shares of Class A common stock and 744,048 warrants, which warrants shall be substantially identical to the Placement Warrants;

 

   

if Digital World does not complete an initial business combination by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), a portion of the proceeds from the sale of the Placement Units will be included in the liquidating distribution to Digital World’s public stockholders. In such event, the 7,187,500 Founder Shares and 1,133,484 shares of Class A common stock underlying the Placement Units, of which 5,537,500 Founder Shares and shares of 1,133,484 Class A common stock are held by Digital World’s Sponsor, directors and officers, would be worthless because they are not entitled to participate in any Redemption or distribution with respect to such shares. Such shares and units had an aggregate market value of $549.18 million as of March 31, 2022, based on the closing price per Class A common stock of Digital World as of March 31, 2022 of $64.51 per share and the closing price of Digital World’s units of $75.44 per unit on Nasdaq on March 31, 2022. Additionally, the Placement Warrants underlying the Placement Units will expire worthless.

 

   

if the Trust Account is liquidated, including in the event Digital World is unable to complete an initial business combination within the required time period, the Sponsor has agreed to indemnify Digital World to ensure that the proceeds in the Trust Account are not reduced below $10.20 per Public Share by the claims of prospective target businesses with which Digital World has entered into an acquisition agreement or claims of any third party for services rendered or products sold to Digital World, but only if such a vendor or target business has not executed a waiver of any and all rights to seek access to the Trust Account.

 

   

The Sponsor (including its representatives and affiliates) and Digital World’s directors and officers, are, or may in the future become, affiliated with entities that are engaged in a similar business to Digital World. For example, Patrick Orlando, Digital World’s Chief Executive Officer and Chairman, serves as Chief Executive officer and director of Benessere Capital Acquisition Corp. and Eric Swider

 

41


 

and Justin Shaner, Digital World’s directors, both serve as directors of Benessere Capital Acquisition Corp. Benessere Capital Acquisition Corp. is a special purpose acquisition company, which entered into an Agreement and Plan of Merger with eCombustible Energy LLC on November 23, 2021. Mr. Orlando also serves as a director of Maquia Capital Acquisition Corp., a special purpose acquisition corporation that is focusing its search for a business combination with technology-focused middle market and emerging growth companies in North America. The Sponsor and Digital World’s directors and officers are not prohibited from sponsoring, or otherwise becoming involved with, any other blank check companies prior to Digital World completing its initial business combination. Digital World’s directors and officers also may become aware of business opportunities which may be appropriate for presentation to Digital World, and the other entities to which they owe certain fiduciary or contractual duties, including Benessere Capital Acquisition Corp. and Maquia Capital Acquisition Corp. Accordingly, they may have had conflicts of interest in determining to which entity a particular business opportunity should be presented. These conflicts may not be resolved in Digital World’s favor and such potential business opportunities may be presented to other entities prior to their presentation to Digital World, subject to applicable fiduciary duties under DGCL. Digital World Charter provides that Digital World renounces its interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as a director or officer of Digital World and such opportunity is one Digital World is legally and contractually permitted to undertake and would otherwise be reasonable for Digital World to pursue, and to the extent the director or officer is permitted to refer that opportunity to Digital World without violating another legal obligation.

 

   

Messrs.                  and                  of Digital World’s directors are expected to be appointed as directors of the Combined Entity after the consummation of the Business Combination, Messrs.                  and                  may in the future receive cash fees, stock options or stock awards that the Combined Entity determines to pay to its directors.

Emerging Growth Company

Digital World is currently and, following the consummation of the Business Combination, the Combined Entity will be, an “emerging growth company,” as defined in the Securities Act, as modified by the Jumpstart Our Business Startups Act (“JOBS Act”). Digital World has taken, and the Combined Entity may continue to take, advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”), reduced disclosure obligations regarding executive compensation in Digital World’s periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, stockholders of Digital World and the Combined Entity may not have access to certain information they may deem important.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Digital World has not elected to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, Digital World (and, following the Business Combination, the Combined Entity), as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of Digital World’s and the Combined Entity’s financial statements with certain other public companies difficult or impossible because of the potential differences in accounting standards used.

 

42


Digital World (and following the Business Combination, the Combined Entity) will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year following the fifth anniversary of the closing of the Digital World IPO, (ii) the last day of the fiscal year in which Digital World (and following the Business Combination, the Combined Entity) has total annual gross revenue of at least $1.07 billion; (iii) the last day of the fiscal year in which Digital World (and following the Business Combination, the Combined Entity) is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of Digital World’s (and following the Business Combination, the Combined Entity’s) common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year; or (iv) the date on which Digital World (and following the Business Combination, the Combined Entity) has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Summary of Risk Factors

This discussion includes forward-looking information regarding our business, results of operations and cash flows and contractual obligations and arrangements that involves risks, uncertainties and assumptions. Our actual results may differ materially from any future results expressed or implied by such forward-looking statements as a result of various factors, including, but not limited to, those discussed in the sections of this proxy statement/prospectus entitled “Cautionary Note Regarding Forward-Looking Statements.”

Risks Related to Digital World and the Business Combination

 

   

Digital World’s stockholders can exercise redemption rights with respect to a large number of Digital World’s shares, which may impair Digital World to complete the Business Combination or optimize its capital structure.

 

   

The SEC may delay declaring this registration statement effective or disapprove this transaction and issue a stop order or similar order with respect to this registration statement which could materially delay or materially impede the consummation of the Business Combination.

 

   

Digital World has not obtained an opinion from an unaffiliated third party as to the fair market value of TMTG or that the price it is paying for TMTG is fair to its stockholders from a financial point of view.

 

   

You may be unable to ascertain the merits or risks of TMTG’s operations.

 

   

There is no assurance that Digital World’s diligence will reveal all material risks that may present with regard to TMTG.

 

   

The unaudited pro forma financial information included in the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” may not be representative of New Digital World’s financial condition or results of operations if the Business Combination is consummated.

 

   

The Combined Entity’s ability to be successful following the Business Combination will depend upon the efforts of the Combined Entity’s board of directors and key personnel and the loss of such persons could negatively impact the operations and profitability of New Digital World’s business.

 

   

The value of the Founder Shares following completion of the Business Combination is likely to be substantially higher than the nominal price paid for them, even if the trading price of New Digital World common stock at such time is substantially less than $10.00 per share.

 

   

Digital World’s and TMTG’s stockholders may not realize a benefit from the Business Combination commensurate with the dilution they will experience in connection with the Business Combination and the PIPE.

 

   

During the pendency of the Business Combination, Digital World and TMTG may not be able to enter into a business combination with another party because of restrictions in the Merger Agreement, which could adversely affect their respective businesses.

 

43


   

Delaware law and New Digital World’s Amended Charter and bylaws will contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

 

   

The Amended Charter will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between New Digital World and its stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit the ability of New Digital World’s stockholders to choose the judicial forum for disputes.

Risks Related to TMTG

 

   

TruthSocial is the only product TMTG is currently commercializing, and TMTG depends almost entirely on TruthSocial for its success.

 

   

TMTG has limited experience as a commercial company and the launch of TruthSocial may be less successful than anticipated.

 

   

The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our business, including our financial results and prospects.

 

   

TMTG’s market for TruthSocial is subject to intense competition.

Risks Related to Ownership of New Digital World Common Stock

 

   

Nasdaq may delist New Digital World’s securities from its exchange.

 

   

The market price of New Digital World’s common stock may decline as a result of the Business Combination.

 

   

There are no current plans to pay cash dividends on the New Digital World common stock for the foreseeable future.

 

   

New Digital World stockholders may experience dilution in the future.

 

   

Future sales, or perceived future sales, by New Digital World or its stockholders in the public market following the Business Combination could cause the market price for New Digital World common stock to decline.

 

   

If Digital World public stockholders fail to comply with the redemption requirements specified in this proxy statement/prospectus, they will not be entitled to redeem their public shares for a pro rata portion of the funds held in the Trust Account.

Risks Related to Redemption

 

   

The ability to execute Digital World and TMTG’s strategic plan could be negatively impacted to the extent a significant number of stockholders choose to redeem their shares in connection with the Business Combination.

 

   

There is no guarantee that a Digital World public stockholder’s decision whether to redeem its shares of Digital World common stock for a pro rata portion of the Trust Account will put such stockholder in a better future economic position.

 

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SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION OF DIGITAL WORLD

The summary statements of operations data for the year ended December 31, 2021 and the summary balance sheet data as of December 31, 2021 are derived from Digital World’s audited financial statements included elsewhere in this proxy statement/prospectus. The summary statements of operations data for the year ended December 31, 2021 and the summary balance sheet data as of December 31, 2021 are derived from Digital World’s audited financial statements, each of which is included elsewhere in this proxy statement/prospectus.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should carefully read the following selected financial information in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Digital World” and Digital World’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus.

Statements of Operations Data:

 

     Year Ended
December 31, 2021
 

Formation and operating costs

   $ 1,191,593  

Franchise tax expense

     200,000  
  

 

 

 

Loss from operation costs

     (1,391,593

Other income and expenses:

  

Interest earned on cash held in Trust Account

     7,098  
  

 

 

 

Net loss

   $ (1,384,495
  

 

 

 

Weighted average shares outstanding of Class A common stock

     9,404,134  

Basic and diluted net income per Class A common stock

   $ (0.08
  

 

 

 

Weighted average shares outstanding of Class B common stock

     7,187,500  

Basic and diluted net income per Class B common stock

   $ (0.08
  

 

 

 

Statements of Balance Sheet Data:

 

     As of
December 31,
2021
 

Balance Sheet Data:

  

Total assets

   $ 293,990,852  

Total liabilities

   $ 10,746,035  

Class A common stock subject to possible redemption

   $ 293,250,000  

Working capital (deficit)(1)

   $ (114,832

Total stockholders’ (deficit) equity

   $ (10,005,183

 

(1)

Working capital (deficit) is defined as total current assets minus total current liabilities

 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF TMTG

The summary statement of operations data for the year ended December 31, 2021 and the summary balance sheet data as of December 31, 2021 are derived from TMTG’s audited financial statements included elsewhere in this proxy statement/prospectus. The summary statement of operations data for the year ended December 31, 2021 and the summary balance sheet data as of December 31, 2021 are derived from TMTG’s audited financial statements, each of which is included elsewhere in this proxy statement/prospectus.

The historical results presented below are not necessarily indicative of the results to be expected for any future period. You should carefully read the following selected financial information in conjunction with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of TMTG” and TMTG’s financial statements and the related notes appearing elsewhere in this proxy statement/prospectus.

Statement of Operations Data:

 

     Period Ended
December 31,
 

in thousands, except share and per share data

   2021  

Net Sales – related party

   $ 2,123.3  

Cost of revenue

     —  

Gross profit

     2,123.3  

Operating costs and expenses:

  

Research and development

     2,571.3

Sales and marketing

     381.7

General and administrative

     3,425.8
  

 

 

 

Loss from operations

     (4,255.5  

Interest expense

     (654.3 )

Change in fair value of derivative liabilities

     (54,186.4 )
  

 

 

 

Loss from operations before income taxes

     (59,096.2 )

Income tax benefit

     —  
  

 

 

 

Net loss

   $ (59,096.2  
  

 

 

 

Weighted-average common shares used in net loss per share attributable to common stockholders, basic and diluted

  

 

100,000,000

 

Net loss per common share attributable to common stockholders, basic and diluted

     (0.59
  

 

 

 

Statement of Balance Sheet Data:

 

in thousands

   As of December 31,
2021
 

Cash and cash equivalents

   $ 18,734.4  

Total assets

     19,251.2  

Total liabilities

     78,347.4  

Working capital(1)

     18,282.1  

Accumulated deficit

     (59,096.2

Total stockholders’ deficit

   $ (59,096.2

 

(1)

Working capital is defined as total current assets minus total current liabilities

 

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SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Defined terms included below shall have the same meaning as terms defined and included elsewhere in this this proxy statement/prospectus.

The following summary unaudited pro forma condensed combined financial data, (the “summary pro forma data”) gives effect to the Business Combination described in the section entitled “Unaudited Pro Forma Condensed Combined Financial Information.” The Business Combination is expected to be accounted for as a reverse recapitalization, with no goodwill or other intangible assets recorded, in accordance with U.S. GAAP. Under this method of accounting, Digital World will be treated as the “acquired” company for financial reporting purposes. The net assets of Digital World will be stated at historical cost, with no goodwill or other intangible assets recorded.

The summary unaudited pro forma condensed combined balance sheet data as of December 31, 2021 gives pro forma effect to the Business Combination and related transactions as if they had occurred on December 31, 2021. The summary unaudited pro forma condensed combined statement of operations data for the year ended December 31, 2021 give pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2021.

The summary pro forma data have been derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial information of the Combined Entity appearing elsewhere in this proxy statement/prospectus and the accompanying notes. The unaudited pro forma condensed combined financial information is based upon, and should be read in conjunction with, the historical consolidated financial statements of Digital World and related notes and the historical financial statements of TMTG and related notes, in each case, included in this proxy statement/prospectus. The summary pro forma data have been presented for informational purposes only and are not necessarily indicative of what the Combined Entity’s financial position or results of operations actually would have been had the Business Combination and the other transactions contemplated by the Merger Agreement (described elsewhere in this proxy statement/prospectus) been completed as of the dates indicated. In addition, the summary pro forma data do not purport to project the future financial position or operating results of the Combined Entity.

For illustrative purposes the unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of additional redemptions of Digital World Class A common stock:

 

   

Assuming Minimum Additional Redemptions (“Minimum Redemption”) — this scenario assumes that no shares of Digital World Class A common stock are redeemed; and

 

   

Assuming Maximum Redemptions (“Maximum Redemption”) — This scenario assumes additional redemption of 28.8 million shares of Digital World Class A common stock, for aggregate payment of approximately $273.3 million from the Trust Account), so that Digital World retains at least $5,000,001 in net tangible assets immediately prior to or upon the consummation of the Business Combination (after giving effect to payments of all unpaid expenses, Digital World’s liabilities and redemptions by Digital World’s public stockholders and excluding TMTG’s closing cash and the proceeds of the private placement).

 

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Assuming No Redemption, on a pro forma estimated basis, TMTG’s existing securityholders will hold 88,948,023 shares of Class A common stock of the Combined Entity immediately after the Closing, which approximates a 70.1% ownership level. Assuming Max Redemption, on a pro forma estimated basis, TMTG will hold common stock of the Combined Entity approximating an 90.6% ownership level.

 

     Assuming No Redemption      Assuming Max Redemption  

Stockholder

   % Ownership     Shares      % Ownership     Shares  

TMTG(a)(b)

     70.1     88,948,023        90.6     88,948,023  

Public

     23.7     30,027,234        1.3     1,277,234  

Sponsor (including % of Digital World’s directors and officers)

     6.2     7,931,548        8.1     7,931,548  
  

 

 

   

 

 

    

 

 

   

 

 

 

Total

     100     126,906,805        100     98,156,805  
  

 

 

   

 

 

    

 

 

   

 

 

 

 

(a)

Refer to Note 1 Share consideration to TMTG for the calculation of shares issued to TMTG at Closing.

(b)

Includes 3,163,709 shares issued for TMTG convertible promissory notes.

The foregoing ownership percentages with respect to the Combined Entity following the Business Combination are based on the assumption that there are no adjustments for the outstanding Public Warrants or Placement Warrants issued by Digital World and assume that: (i) there are either no redemptions or the maximum redemptions, (ii) no awards are issued under the Equity Incentive Plan, (iii) no Working Capital Units or Extension Units are issued and no shares of Preferred Stock are converted. If the actual facts are different than these assumptions (which they are likely to be), the percentage ownership retained by the Digital World’s existing stockholders in the Combined Entity will be different. Upon consummation of the Business Combination, and subject to approval of the Incentive Plan Proposal, TMTG’s executive officers are expected to receive grants of stock options and restricted stock units under the Equity Incentive Plan from time to time as determined by the Compensation Committee. In addition, the outstanding TMTG Options and TMTG RSUs granted to TMTG’s executive officers and certain members of the TMTG Board under the TMTG 2022 Plan prior to the Closing of the Business Combination will be assumed and converted to options and RSUs under the Equity Incentive Plan effective as of the Closing the Business Combination.

If the actual facts are different than these assumptions, then the amounts and shares outstanding in the unaudited pro forma condensed combined financial information will be different.

 

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UNAUDITED HISTORICAL COMPARATIVE AND PRO FORMA COMBINED PER SHARE DATA OF DIGITAL WORLD AND TMTG

Defined terms included below shall have the same meaning as terms defined and included elsewhere in this this proxy statement/prospectus.

The following table sets forth selected historical comparative share information of Digital World and TMTG and unaudited pro forma condensed combined per share information of the Combined Entity after giving effect to the Business Combination, assuming No Redemption and Max Redemption, respectively.

The unaudited pro forma book value information reflects the Business Combination and related transactions as if they had occurred on December 31, 2021. The weighted average shares outstanding and net loss per share information give pro forma effect to the Business Combination and related transactions as if they had occurred on January 1, 2021.

The historical book value per share is computed by dividing total common stockholders’ equity by the number of shares of common stock outstanding at the end of the period. The pro forma combined book value per share is computed by dividing total pro forma common stockholders’ equity by the pro forma number of shares of common stock outstanding at the end of the period. The pro forma earnings per share of the Combined Entity is computed by dividing the pro forma income available to the Combined Entity’s common stockholders by the pro forma weighted average number of shares outstanding over the period.

This information is only a summary and should be read together with the selected historical financial information included elsewhere in this proxy statement/prospectus, and the historical financial statements of Digital World and TMTG and related notes that are included elsewhere in this proxy statement/prospectus. The unaudited pro forma combined per share information of Digital World and TMTG is derived from, and should be read in conjunction with, the unaudited pro forma condensed combined financial statements and related notes included elsewhere in this proxy statement/prospectus.

The unaudited pro forma combined earnings per share information below does not purport to represent the earnings per share which would have occurred had the companies been combined during the periods presented, nor earnings per share for any future date or period. The unaudited pro forma combined book value per share information below does not purport to represent what the value of Digital World and TMTG would have been had the companies been combined during the periods presented.

 

                 Combined Pro Forma  

As of and for the year ended
December 31, 2021(3)

   Digital
World
(Historical)
    TMTG
(Historical)
    Assuming No
Redemption
    Assuming Max
Redemption
 

Book value per diluted share(1)(2)

   $ (0.60   $ (0.59   $ 8.02     $ 10.38  

Common stock Net loss per share, basic and diluted

     —       $ (0.59     —         —    

Common stock Weighted average shares outstanding – basic and diluted(2)

     —         100,000,000       —         —    

Class A common stock Net loss per share, basic and diluted

   $ (0.08   $ —       $ (0.55   $ (0.72

Class A common stock Weighted average shares outstanding – basic and diluted(2)

     9,404,134       —         126,906,805       98,156,805  

Class B common stock Net loss per share-basic and diluted

   $ (0.08     —         —         —    

Class B common stock Weighted average shares outstanding-basic and diluted(2)

     7,187,500       —         —         —    

 

(1)

Book value per share = total equity (deficit)/common shares outstanding at December 31, 2021 for Digital World, TMTG and pro forma.

 

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(2)

Historical book value per share and net income (loss) per share are based on total common stock for Digital World and total common stock for TMTG.

(3)

There were no cash dividends declared in the periods presented.

 

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DIVIDENDS ON SECURITIES

Digital World

Holders of Digital World

As of the Record Date, there were ______ holders of record of Digital World common stock, and ______ holders of record of Warrants and ______ holders of Units.

Dividend Policy of Digital World

Digital World has not paid any cash dividends on its common stock to date and does not intend to pay cash dividends prior to the completion of its initial business combination.

Dividend Policy of TMTG

TMTG has not paid any cash dividends on its stock to date and does not intend to pay cash dividends prior to the completion of the Business Combination. TMTG is also party to debt agreements with covenants that limit TMTG’s ability to pay dividends or make distributions with respect to its common stock. All of such debt agreements will convert to common stock upon completion of the Business Combination and will no longer limit TMTG’s ability to pay dividends.

Dividend Policy of the Combined Entity Following the Business Combination

The Combined Entity intends to retain future earnings, if any, for future operations and expansion and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any cash dividends in the future will be at the sole discretion of the Combined Entity’s board of directors, and will depend upon the Combined Entity’s revenue earnings, if any, available cash, current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, general financial condition subsequent to completion of the Business Combination and such other factors as the Combined Entity’s board of directors may deem relevant.

 

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RISK FACTORS

You should carefully consider all the following risk factors, together with all of the other information included or incorporated by reference in this proxy statement/prospectus, including the financial information, before deciding whether or how to vote or instruct your vote to be cast to approve the proposals described in this proxy statement/prospectus.

The value of your investment following consummation of the Business Combination will be subject to significant risks affecting, among other things, the Combined Entity’s business, financial condition or results of operations. If any of the events described below occur, the Combined Entity’s post-Business Combination business and financial results could be adversely affected in material respects. This could result in a decline, which may be significant, in the trading price of the Combined Entity’s securities and you therefore may lose all or part of your investment. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to the businesses of Digital World and TMTG. Any reference in this “Risk Factors” section to the “surviving entity” shall mean New Digital World.

Risks Related to Digital World and the Business Combination

The ability of Digital World’s stockholders to exercise redemption rights with respect to a large number of Digital World’s shares may not allow Digital World to complete the Business Combination or optimize its capital structure.

Because the Merger Agreement requires Digital World to have at least $5,000,001 in net tangible assets at Closing (after giving effect to redemptions by Digital World’s public stockholders), Digital World will need to reserve a portion of the cash in the Trust Account to meet such requirements, unless such closing condition is waived by TMTG. In addition, if a larger number of shares are submitted for redemption than Digital World currently expects, Digital World may need to seek to restructure the transaction to reserve a greater portion of the cash in the Trust Account. If the Business Combination is unsuccessful, you would not receive your pro rata portion of the Trust Account until Digital World liquidates the Trust Account or consummates an alternative initial business combination or upon the occurrence of an Extension or certain other corporation actions as set forth in the Digital World Charter. If you are in need of immediate liquidity, you could attempt to sell your stock in the open market; however, at such time Digital World’s stock may trade at a discount to the pro rata amount per share in the Trust Account or there may be limited market demand at such time. In either situation, you may suffer a material loss on your investment or lose the benefit of funds expected in connection with Digital World’s redemption until Digital World liquidates, consummates an alternative initial business combination, effectuates an Extension or takes certain other actions set forth in the Digital World Charter or you are able to sell your stock in the open market.

The SEC may delay declaring this registration statement effective or disapprove this transaction and issue a stop order or similar order with respect to this registration statement which could materially delay or materially impede the consummation of the Business Combination.

In connection with an SEC investigation, Digital World received a document request and subpoena from the SEC seeking various documents and information regarding, among other things, meetings of Digital World Board; communications with and the evaluation of potential targets, including TMTG; communications relating to TMTG; agreements with and payments made to certain advisors; investors, including investor meetings and agreements; the appointment of certain of Digital World’s officers and directors; policies and procedures relating to trading; and documents sufficient to identify banking, telephone, and email addresses. The use of this proxy statement/prospectus would require the SEC to declare effective the registration statement of which it is a part. If a delay or suspension arises out of, or is a result of, or is related to the SEC being unable or unwilling to declare the registration statement effective or if the SEC issues any stop order suspending the effectiveness of our registration statement or indicates the intention to initiate any proceedings for such purpose, it could materially delay or materially impede the consummation of the Business Combination.

 

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Digital World has not obtained an opinion from an independent investment banking firm or another independent firm, and consequently, you may have no assurance from an independent source that the terms of the Business Combination are fair to the stockholders of Digital World from a financial point of view.

The Digital World Board did not obtain a third-party valuation or fairness opinion in connection with their determination to approve the Business Combination. Digital World is not required to obtain an opinion from an independent investment banking firm that is a member of Financial Industry Regulatory Authority, Inc. (“FINRA”) or from another independent firm that the price it is paying is fair to the stockholders of Digital World from a financial point of view. Digital World will not obtain a third-party valuation or fairness opinion prior to closing the Business Combination. In analyzing the Business Combination, the Digital World Board and Digital World’s management conducted due diligence on the TMTG and researched the industry in which TMTG operates and concluded that the Business Combination was in the best interest of its stockholders. Accordingly, Digital World’s stockholders will be relying solely on the judgment of the Digital World Board in determining the value of the Business Combination, and the Digital World Board may not have properly valued such business. The lack of third-party valuation or fairness opinion may also lead an increased number of stockholders to vote against the Business Combination or demand redemption of their shares, which could potentially impact our ability to consummate the Business Combination. For more information about our decision-making process, see the section entitled “The Business Combination Proposal (Proposal 1) — The Board’s Reasons for Approval of the Business Combination.”

You may be unable to ascertain the merits or risks of TMTG’s operations.

If the Business Combination is consummated, the Combined Entity will be affected by numerous risks inherent in TMTG’s business operations. See “—Risks Related to TMTG.” Although Digital World’s management has endeavored to evaluate the risks inherent in the proposed Business Combination with TMTG, Digital World cannot assure you that it can adequately ascertain or assess all of the significant risk factors. Furthermore, some of these risks may be outside of Digital World’s control. Digital World also cannot assure you that an investment in Digital World’s securities will not ultimately prove to be less favorable to investors in Digital World than a direct investment, if an opportunity were available, in TMTG. In addition, if Digital World’s stockholders do not believe that the prospects for the Business Combination are promising, a greater number of stockholders may exercise their redemption rights, which may make it difficult for Digital World to consummate the Business Combination.

There is no assurance that Digital World’s diligence will reveal all material risks that may be present with regard to TMTG. Subsequent to the completion of the Business Combination, the Combined Entity may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition and its share price, which could cause you to lose some or all of your investment.

Digital World cannot assure you that the due diligence Digital World has conducted on TMTG will reveal all material issues that may be present with regard to TMTG, or that it would be possible to uncover all material issues through a customary amount of due diligence or that risks outside of Digital World’s control will not later arise. TMTG is aware that Digital World must complete an initial business combination by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination). Consequently, TMTG may have obtained leverage over Digital World in negotiating the Merger Agreement, knowing that if Digital World does not complete the Business Combination, Digital World may be unlikely to be able to complete an initial business combination with any other target business prior to such deadline. In addition, Digital World has had limited time to conduct due diligence. TMTG is a privately held company and Digital World therefore has made its decision to pursue a business combination with TMTG on the basis of limited information, which may result in a business combination that is not as profitable as expected, if at all. As a result of these factors, the Combined Entity may be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in reporting losses. Even if Digital World’s due

 

53


diligence successfully identified certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with Digital World’s preliminary risk analysis. Even though these charges may be non-cash items and would not have an immediate impact on Digital World’s liquidity, the fact that Digital World reports charges of this nature could contribute to negative market perceptions about Digital World or Digital World’s securities. In addition, charges of this nature may cause Digital World to violate leverage or other covenants to which it may be subject as a result of it obtaining post-combination debt financing. Accordingly, any stockholders of Digital World who choose to remain stockholders of the Combined Entity following the Business Combination could suffer a reduction in the value of their shares. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by Digital World’s officers or directors of a duty of care or other fiduciary duty owed by them to Digital World, or if they are able to successfully bring a private claim under securities laws that the proxy statement/prospectus relating to the Business Combination contained an actionable material misstatement or material omission.

The unaudited pro forma financial information included in the section entitled Unaudited Pro Forma Condensed Combined Financial Statements may not be representative of New Digital World’s financial condition or results of operations if the Business Combination is consummated and accordingly, you will have limited financial information on which to evaluate the financial performance of New Digital World and your investment decision.

Digital World and TMTG currently operate as separate companies. Digital World and TMTG have had no prior history as a combined entity and their respective operations have not previously been managed on a combined basis. The pro forma financial information is presented for informational purposes only and is not necessarily indicative of the financial position or results of operations that would have actually occurred had the Business Combination been completed at or as of the dates indicated, nor is it indicative of the future operating results or financial position of New Digital World. The pro forma statement of earnings does not reflect future nonrecurring charges resulting from the Business Combination. The unaudited pro forma financial information does not reflect future events that may occur after the Business Combination and does not consider potential impacts of current market conditions on revenues or expenses. The pro forma financial information included in the section entitled “Unaudited Pro Forma Condensed Combined Financial Statements” has been derived from Digital World’s and TMTG’s historical financial statements and certain adjustments and assumptions have been made regarding the combined entity after giving effect to the Merger. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting will occur and could have an adverse impact on the pro forma financial information and New Digital World’s financial position and future results of operations.

In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate and other factors may affect New Digital World’s financial condition or results of operations following the Closing. Any potential decline in New Digital World’s financial condition or results of operations may cause significant variations in the stock price of New Digital World.

Digital World may issue additional shares of common or preferred stock to complete the Business Combination, PIPE Investment or under the Equity Incentive Plan after completion of the Business Combination, any one of which would dilute the interest of Digital World’s stockholders and likely present other risks.

The Digital World Charter authorizes the issuance of up to 200,000,000 shares of Class A common stock, 10,000,000 shares of Class B Common Stock, and 1,000,000 shares of preferred stock, par value $0.0001 per share. There are currently 169,972,766 authorized but unissued shares of Class A common stock available for issuance, which amount does not take into account shares reserved for issuance upon exercise of outstanding warrants. There are currently 2,812,500 authorized but unissued shares of Class B common stock available for issuance. There are currently no shares of preferred stock issued and outstanding. Digital World may issue a

 

54


substantial number of additional shares of common or preferred stock to complete the Business Combination, the PIPE Investment or under the Equity Incentive Plan after completion of the Business Combination. However, the Digital World Charter provides, among other things, that prior to Digital World’s initial business combination, Digital World may not issue additional shares of capital stock that would entitle the holders thereof to (i) receive funds from the Trust Account or (ii) vote on any initial business combination. These provisions of the Digital World Charter, like all other provisions thereof, may be amended with a stockholder vote. Digital World’s executive officers and directors have agreed, pursuant to a written agreement with Digital World, that they will not propose any amendment to the Digital World Charter that would affect the substance or timing of Digital World’s obligation to redeem 100% of its public shares if Digital World does not complete the initial business combination by September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination), unless Digital World provides its public stockholders with the opportunity to redeem their shares of Class A common stock upon approval of any such amendment at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the Trust Account, including interest (which interest shall be net of taxes payable and working capital released to Digital World), divided by the number of then outstanding public shares.

The issuance of additional shares of common or preferred stock:

 

   

may significantly dilute the equity interest of existing investors;

 

   

may subordinate the rights of holders of common stock if preferred stock is issued with rights senior to those afforded Digital World’s common stock;

 

   

could cause a change in control if a substantial number of common stock is issued, which may affect, among other things, Digital World’s ability to use its net operating loss carry forwards, if any, and could result in the resignation or removal of Digital World’s present officers and directors; and

 

   

may adversely affect prevailing market prices for Digital World’s Units, Class A common stock and/or Warrants.

On December 4, 2021, in support of the Business Combination, Digital World entered into an SPA with the PIPE Investors, pursuant to which the PIPE Investors agreed to purchase up to an aggregate of 1,000,000 shares of Preferred Stock for a purchase price of $1,000 per share for an aggregate commitment of up to $1,000,000,000 in a PIPE to be consummated concurrently with the Closing. The Preferred Stock have an initial conversion price per share of $33.60 and are initially convertible into 29,761,905 shares of Digital World common stock, subject to upward adjustment as described herein. Such conversions could have a depressive effect on the market price of the Combined Entity’s common stock.

Additionally, in connection with the PIPE, the Sponsor, as majority holder of Digital World’s Class B common stock, waived certain anti-dilution rights of the holders of Class B common stock (the “Class B Holders”) to any increase in the number of shares of Class A common stock issuable upon conversion of the Class B common stock. In exchange for such waiver (“Waiver Letter”), and in the event that the transactions contemplated by the SPA are consummated in accordance with its terms, the Class B Holders will be entitled to receive (i) an aggregate of 744,048 shares of Class A common stock (the “Anti-dilution Shares”) and (ii) warrants to purchase an aggregate of 744,048 shares of Class A common stock at an exercise price per share of $33.60 for a term of five years. The warrants shall otherwise have terms, including but not limited to registration rights, that are substantially identical to the warrants previously issued to the Class B Holders and shall not contain any anti-dilution or reset provisions, except for standard adjustments for any stock splits, stock dividends, recapitalizations and similar events. Such Anti-dilution Shares and warrants issuable in connection with such waiver could have a depressive effect on the market price of the Combined Entity’s common stock.

 

55


Failure by New Digital World to timely file and to obtain and maintain effectiveness of any registration statement required to be filed under the Registration Rights Agreement will result in New Digital World paying to each PIPE Investor an amount in cash, as liquidated damages, which will adversely affect the operation of the New Digital World.

The PIPE Investors were also given registration rights in a registration rights agreement (the “Registration Rights Agreement”) pursuant to which, subject to certain exceptions, Digital World will be required to file a resale registration statement for all of the shares of common stock issuable upon conversion of the Preferred Stock held by the PIPE Investors within 10 days following this proxy statement/prospectus to be filed in connection with the Business Combination and shall be declared effective no later than the Closing of the Business Combination (the “Initial Registration Statement”). Thereafter, New Digital World will be required to register and to maintain the registration for all shares underlying the Preferred Stock until the Effective Date. Failure by New Digital World to timely file and to obtain and maintain effectiveness of any registration statement required to be filed under the Registration Rights Agreement will result in New Digital World paying to each PIPE Investor an amount in cash, as liquidated damages and not as a penalty, equal to (A) with respect to the first two months, 2% of the subscription price paid by each PIPE Investor for any unregistered registrable securities, plus (B) with respect to the third month and beyond, 6% of the subscription price paid by each PIPE Investor for any unregistered registrable securities. In no case will the maximum aggregate liquidated damages payable to a PIPE Investor exceed 20% of the subscription price paid by such PIPE Investor. If New Digital World fails to pay any liquidated damages in full within seven days after the date payable, New Digital World will pay interest thereon at a rate of 18% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the PIPE Investor, until such amounts, plus all such interest thereon, are paid in full, subject to the aggregate limitation.

Digital World’s independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about its ability to continue as a “going concern.”

On December 31, 2021, Digital World had cash of $293,257,098 held in the Trust Account and $327,731 outside of the Trust Account. Further, Digital World incurred and expect to continue to incur significant costs in pursuit of its financing and acquisition plans. Management’s plans to address this need for capital discussed in the section of this proxy statement/prospectus titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Digital World.” Digital World cannot assure you that its plans to raise capital or to consummate an initial business combination will be successful. These factors, among others, raise substantial doubt about Digital World’s ability to continue as a going concern. The financial statements contained elsewhere in this proxy statement/prospectus do not include any adjustments that might result from its inability to continue as a going concern.

Digital World is dependent upon its executive officers and directors and their departure could adversely affect Digital World’s ability to operate and to consummate the initial business combination; Digital World’s executive officers and directors also allocate their time to other businesses, thereby causing potential conflicts of interest that could have a negative impact on Digital World’s ability to complete the initial business combination.

Digital World’s operations and its ability to consummate the Business Combination are dependent upon a relatively small group of individuals and, in particular, its executive officers and directors. Digital World believes that its success depends on the continued service of its executive officers and directors, at least until the completion of the Business Combination. Digital World does not have an employment agreement with, or key-man insurance on the life of, any of its executive officers or directors. The unexpected loss of the services of one or more of Digital World’s executive officers or directors could have a detrimental effect on Digital World and the ability to consummate the Business Combination. In addition, Digital World’s executive officers and directors are not required to commit any specified amount of time to its affairs and, accordingly, will have conflicts of interest in allocating management time among various business activities, including monitoring the due diligence and undertaking the other actions required in order to consummate the Business Combination. Each

 

56


of Digital World’s executive officers is engaged in several other business endeavors for which they may be entitled to substantial compensation and Digital World’s directors also serve as officers and board members for other entities. If Digital World’s executive officers’ and directors’ other business affairs require them to devote substantial amounts of time to such affairs in excess of their current commitment levels, it could limit their ability to devote time to Digital World’s affairs which may have a negative impact on Digital World’s ability to consummate the Business Combination.

Certain of Digital World’s officers and directors are now, and all of them may in the future become, affiliated with entities engaged in business activities similar to those intended to be conducted by Digital World and, accordingly, may have conflicts of interest in allocating their time and determining to which entity a particular business opportunity should be presented.

Until Digital World consummates its initial business combination, it intends to engage in the business of identifying and combining with one or more businesses. The Sponsor and Digital World’s officers and directors are, and may in the future become, affiliated with entities (such as operating companies or investment vehicles) that are engaged in a similar business, including other special purpose acquisition companies with a class of securities registered under the Exchange Act.

Digital World’s officers and directors also may become aware of business opportunities which may be appropriate for presentation to us and the other entities to which they owe certain fiduciary or contractual duties. Digital World’s amended and restated certificate of incorporation provides that it renounces its interest in any corporate opportunity offered to any director or officer unless such opportunity is expressly offered to such person solely in his or her capacity as Digital World’s director or officer and such opportunity is one Digital World is legally and contractually permitted to undertake and would otherwise be reasonable for Digital World to pursue, and to the extent the director or officer is permitted to refer that opportunity to Digital World without violating any legal obligation.

In the absence of the “corporate opportunity” waiver in Digital World’s charter, certain candidates would not be able to serve as an officer or director. Digital World believes it substantially benefits from having representatives who bring significant, relevant and valuable experience to its management, and, as a result, the inclusion of the “corporate opportunity” waiver in its amended and restated certificate of incorporation provides it with greater flexibility to attract and retain the officers and directors that Digital World’s feels are the best candidates.

However, the personal and financial interests of Digital World’s directors and officers may influence their motivation in timely identifying and selecting a target business and completing a business combination. The different timelines of competing business combinations could cause Digital World’s directors and officers to prioritize a different business combination over finding a suitable acquisition target for Digital World’s business combination. Consequently, Digital World’s directors’ and officers’ discretion in identifying and selecting a suitable target business may result in a conflict of interest when determining whether the terms, conditions and timing of a particular business combination are appropriate and in Digital World’s stockholders’ best interest, which could negatively impact the timing for a business combination. Digital World is not aware of any such conflicts of interest and does not believe that any such conflicts of interest impacted its search for an acquisition target.

Deferred underwriting fees in connection with the IPO and payable at the consummation of an initial business combination will not be adjusted to account for redemptions by Digital World’s public stockholders; if Digital World’s public stockholders exercise their redemption rights, the amount of effective total underwriting commissions as a percentage of the aggregate proceeds from the IPO will increase.

The underwriters in the IPO are entitled to deferred underwriting commissions totaling $10,062,500 upon the consummation of an initial business combination, such amounts being held in the Trust Account until the

 

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consummation of Digital World’s initial business combination. Such amounts will not be adjusted to account for redemptions of public shares by Digital World’s public stockholders. Accordingly, the amount of effective total underwriting commissions as a percentage of the aggregate proceeds from the IPO will increase as the number of public shares redeemed increases. Assuming no exercise of Digital World warrants, if no public stockholders of Digital World exercise redemption rights with respect to their public shares, the effective deferred underwriting fee would be approximately $0.30 per public share on a pro forma basis (or 3% of the value of public shares assuming a trading price of $10.00 per public share). If public stockholders of Digital World exercise redemption rights with respect to 50% of public shares in connection with the Business Combination, the effective deferred underwriting fee would be approximately $0.55 per public share on a pro forma basis (or 5.5% of the value of shares assuming a trading price of $10.00 per public share). If holders of Digital World’s public shares exercise redemption rights with respect to the maximum number of public shares which would nevertheless allow Digital World to consummate the Business Combination, the effective deferred underwriting fee is $1.05 per public share on a pro forma basis (or 10.5% of the value of shares assuming a trading price of $10.00 per public share).

The Combined Entity’s ability to be successful following the Business Combination will depend upon the efforts of the Combined Entity’s board of directors and key personnel and the loss of such persons could negatively impact the operations and profitability of New Digital World’s post-Business Combination business.

The Combined Entity’s ability to be successful following the Business Combination will be dependent upon the efforts of the Combined Entity’s board of directors and key personnel. Digital World cannot assure you that New Digital World’s board of directors and key personnel will be effective or successful or remain with the Combined Entity. In addition to the other challenges they will face, such individuals may be unfamiliar with the requirements of operating a public company, which could cause the Combined Entity’s management to have to expend time and resources helping them become familiar with such requirements.

It is estimated that, pursuant to the Merger Agreement, Digital World’s public stockholders will own approximately 19.2% of the equity interests of the Combined Entity (assuming no redemptions and full and immediate conversion of the Preferred Stock) and Digital World’s management, other than              and             , who are expected to serve on the board of directors of the Combined Entity, will not be engaged in the management of the Combined Entity’s business. Accordingly, the future performance of the Combined Entity will depend upon the quality of the post-Business Combination board of directors, management and key personnel of the Combined Entity.

Digital World’s key personnel may negotiate employment or consulting agreements with the Combined Entity in connection with the Business Combination. These agreements may provide for them to receive compensation following the Business Combination and as a result, may cause them to have conflicts of interest in determining whether the Business Combination is advantageous.

Digital World’s key personnel may be able to remain with the Combined Entity after the completion of the Business Combination only if they are able to negotiate employment or consulting agreements in connection with the Business Combination. Such negotiations may take place prior to the consummation of the Business Combination and could provide for such individuals to receive compensation in the form of cash payments and/or securities of the Combined Entity for services they would render to the Combined Entity after the completion of the Business Combination. The personal and financial interests of such individuals may influence their motivation in connection with the consummation of the Business Combination. However, Digital World believes the ability of such individuals to remain with the Combined Entity after the completion of the Business Combination will not be the determining factor in Digital World’s decisions regarding the consummation of the Business Combination. There is no certainty, however, that any of Digital World’s key personnel will remain with the Combined Entity after the consummation of the Business Combination. Digital World cannot assure you that any of its key personnel will remain in senior management or advisory positions with the Combined Entity.

 

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Because Digital World’s Sponsor, officers and directors will lose their entire investment in Digital World if the Business Combination or an alternative business combination is not completed, and because Digital World’s Sponsor, officers and directors will not be eligible to be reimbursed for their out-of-pocket expenses if the Business Combination is not completed, a conflict of interest may have arisen in determining whether TMTG was appropriate for Digital World’s initial business combination.

Digital World’s Sponsor, officers and directors currently own 5,537,500 Founder Shares. In addition, the Sponsor purchased an aggregate of 1,133,484 Placement Units, the Placement Warrants underlying which will be worthless if Digital World does not complete a business combination. The Founder Shares are automatically convertible into the shares of Class A common stock at the Closing. However, the holders of Founder Shares and Placement Shares have agreed (A) to vote any shares owned by them in favor of any proposed business combination, (B) not to redeem any shares in connection with a stockholder vote to approve a proposed initial business combination, and (C) to waive their rights to liquidating distributions from the Trust Account with respect to any Founder Shares and Placement Shares held by them if Digital World fails to complete an initial business combination within the requisite time period.

The personal and financial interests of Digital World’s officers and directors may have influenced their motivation in identifying and selecting a target business combination, completing an initial business combination and influencing the operation of the business following the initial business combination. At the closing of Digital World’s initial business combination, its Sponsor, officers and directors, or any of their respective affiliates, will be reimbursed for any out-of-pocket expenses incurred in connection with activities on Digital World’s behalf such as identifying potential target businesses and performing due diligence on suitable business combinations. In the event the Business Combination or an alternative business combination is completed, there is no cap or ceiling on the reimbursement of out-of-pocket expenses incurred in connection with activities on Digital World’s behalf. However, Digital World’s Sponsor, officers and directors, or any of their respective affiliates will not be eligible for any such reimbursement if the Business Combination or an alternative business combination is not completed. Such financial interests of Digital World’s Sponsor, officers and directors may have influenced their motivation in approving the Business Combination and may influence their motivation for completing the Business Combination.

Some of the Digital World and TMTG officers and directors may be argued to have conflicts of interest that may influence them to support or approve the Business Combination without regard to your interests.

Certain officers and directors of Digital World and TMTG participate in arrangements that provide them with interests in the Business Combination that may be different from yours, including, among others, the continued service as an officer or director of New Digital World, severance benefits, equity grants, continued indemnification and the potential ability to sell an increased number of shares of common stock of New Digital World. If the Business Combination is not consummated and Digital World is forced to wind up, dissolve and liquidate in accordance with the Digital World Charter, the 5,537,500 Founder Shares currently held by the Sponsor and directors and officers of Digital World, which were initially acquired prior to the Digital World IPO for an aggregate purchase price of $25,000, will be worthless (as the holders have waived liquidation rights with respect to such shares). Such Founder Shares, assuming conversion into shares of Class A common stock, had an aggregate market value of approximately $357.22 million based upon the closing price of Digital World’s common stock of $64.51 per share on Nasdaq on March 31, 2022. Accordingly, the Sponsor and Digital World’s current officers and directors have interests that may be different from, or in addition to, your interests as a stockholder.

These interests, among others, may influence the officers and directors of Digital World and TMTG to support or approve the Merger. For more information concerning the interests of Digital World and TMTG executive officers and directors, see the sections entitled “The Digital World Business Combination Proposal — Interests of Digital World’s Directors and Officers in the Business Combination” and “The TMTG Business Combination Proposal — Interests of TMTG Directors and Executive Officers in the Business Combination” in this proxy statement/prospectus.

 

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Digital World’s stockholders and TMTG’s stockholders may not realize a benefit from the Business Combination commensurate with the ownership dilution they will experience in connection with the Business Combination and the PIPE.

If New Digital World is unable to realize the full strategic and financial benefits currently anticipated from the Merger, Digital World’s stockholders and TMTG’s stockholders will have experienced substantial dilution of their ownership interests in their respective companies without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent New Digital World is able to realize only part of the strategic and financial benefits currently anticipated from the Business Combination and the PIPE.

During the pendency of the Business Combination, Digital World and TMTG may not be able to enter into a business combination with another party because of restrictions in the Merger Agreement, which could adversely affect their respective businesses. Furthermore, certain provisions of the Merger Agreement may discourage third parties from submitting alternative takeover proposals, including proposals that may be superior to the arrangements contemplated by the Merger Agreement.

Covenants in the Merger Agreement impede the ability of Digital World and TMTG to make acquisitions or complete other transactions that are not in the ordinary course of business pending completion of the Business Combination. As a result, if the Business Combination is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets or other business combination outside the ordinary course of business, with any third party. Any such transactions could be favorable to such party’s stockholders.

If the conditions to the Merger are not met, the Business Combination may not occur.

Even if the Business Combination is approved by the stockholders of Digital World (including each of the required approvals) and TMTG, specified conditions must be satisfied or waived to complete the Business Combination. These conditions are described in detail in the Merger Agreement and in addition to stockholder consent, include among other requirements, (i) receipt of requisite regulatory approvals and no law or order preventing the transactions, (ii) no pending litigation to enjoin or restrict the Closing, (iii) each party’s representations and warranties being true and correct as of the date of the Merger Agreement and as of the Closing (subject to Material Adverse Effect), (iv) each party complying in all material respects with its covenants and agreements, (v) no Material Adverse Effect with respect to a party since the date of the Merger Agreement which remains continuing and uncured, (vi) Digital World having net tangible assets of Digital World having at least $5,000,001 in net tangible assets, after giving effect to the redemption of Digital World public stockholders, (vii) the members of the post-Closing board being elected or appointed, (viii) an effective registration statement, (ix) the conditional Nasdaq approval, (x) Digital World having cash and cash equivalents of at least equal to Sixty Million U.S. Dollars ($60,000,000). See “The Business Combination Proposal (Proposal 1) — General Description of the Merger Agreement — Conditions to the Closing” below for a more complete summary. Digital World and TMTG cannot assure you that all of the conditions will be satisfied. If the conditions are not satisfied or waived, the Business Combination will not occur, or will be delayed and such delay may cause Digital World and TMTG to each lose some or all of the intended benefits of the Business Combination. If the Business Combination does not occur, Digital World may not be able to find another potential candidate for its initial business combination prior to Digital World’s deadline (currently September 8, 2022 (or March 8, 2023 if Digital World extends the period of time to consummate a business combination)), and Digital World will be required to liquidate.

 

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The process of taking a company public by means of a business combination with a special purpose acquisition company (a “SPAC”) is different from taking a company public through an underwritten offering and may create risks for our unaffiliated investors. You may not have the same benefits as an investor in an underwritten public offering.

Like other business combination transactions and spin-offs, in connection with the Business Combination, you will not receive the benefits of the diligence performed by the underwriters in an underwritten public offering. An underwritten offering involves a company engaging underwriters to purchase its shares and resell them to the public. An underwritten offering imposes statutory liability on the underwriters for material misstatements or omissions contained in the registration statement unless they are able to sustain the burden of providing that they did not know and could not reasonably have discovered such material misstatements or omissions. This is referred to as a “due diligence” defense. Due diligence entails engaging legal, financial and/or other experts to perform an investigation as to the accuracy of an issuer’s disclosure regarding, among other things, its business and financial results. Auditors of the issuer also will deliver a “comfort” letter with respect to the financial information contained in the registration statement. In making their investment decision, investors in underwritten public offerings have the benefit of such diligence. Investors in an underwritten public offering may benefit from the role of the underwriters in such an offering. Going public via a business combination with a SPAC does not involve any underwriters and does not generally necessitate the level of review required to establish a “due diligence” defense as would be customary on an underwritten offering.

In an underwritten public offering, an issuer initially sells its securities to the public market via one or more underwriters, who distribute or resell such securities to the public. Underwriters have liability under the U.S. securities laws for material misstatements or omissions in a registration statement pursuant to which an issuer sells securities.

In contrast, Digital World and TMTG have engaged a financial advisor (rather than underwriters) in connection with the Business Combination. The role of a financial advisor typically differs from that of an underwriter. For example, financial advisors do not act as intermediaries in the public sale of securities and therefore do not face the same potential liability under the U.S. securities laws as underwriters. As a result, financial advisors typically do not undertake the same level of, or any, due diligence investigation of the issuer as is typically undertaken by underwriters.

In connection with this proxy statement/prospectus, no parties other than Digital World and TMTG have conducted an investigation of the disclosure contained herein. In addition, as an unaffiliated investor, you will not be afforded the opportunity to perform your own due diligence investigation of, or otherwise obtain information on, Digital World or TMTG beyond the information that is contained in this proxy statement/prospectus (or is otherwise publicly available). You therefore may not have the benefit of the same level of review as an investor in an underwritten public offering, who has the benefit of the underwriters’ evaluation and due diligence investigation of the issuer.

In addition, going public via a business combination with a SPAC does not involve a book-building process as is the case in an underwritten public offering. In any underwritten public offering, the initial value of a company is set by investors who indicate the price at which they are prepared to purchase shares from the underwriters. In the case of a SPAC transaction, the value of the company is established by means of negotiations between the target company, the SPAC and, in some cases, other investors who agree to purchase shares at the time of the business combination. The process of establishing the value of a company in a SPAC business combination may be less effective than the book-building process in an underwritten public offering and also does not reflect events that may have occurred between the date of the business combination agreement and the closing of the transaction. In addition, underwritten public offerings are frequently oversubscribed resulting in additional potential demand for shares in the aftermarket following the underwritten public offering. There is no such book of demand built up in connection with a SPAC transaction and no underwriters with the responsibility of stabilizing the share price which may result in the share price being harder to sustain after the transaction.

 

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Digital World may engage one or more of the underwriters from its initial public offering or one of their respective affiliates to provide additional services, which may include acting as a financial advisor in connection with an initial business combination or as placement agent in connection with a related financing transaction. These financial incentives may cause them to have potential conflicts of interest in rendering any such additional services to Digital World, including, for example, in connection with the sourcing and consummation of an initial business combination.

Digital World may engage one or more of the underwriters of its initial public offering or one of their respective affiliates to provide additional services, which may include acting as a financial advisor in connection with an initial business combination or as placement agent in connection with a related financing transaction. In connection with the PIPE, at the Closing, New Digital World will pay EF Hutton, division of Benchmark Investments, LLC and representative to the underwriters in Digital World’s IPO, as Digital World’s placement agent and capital market advisor, a fee equal to 2.5% of the gross proceeds of the PIPE. Such underwriters are also entitled to receive deferred commissions that are conditioned on the completion of an initial business combination. Such underwriters’ or their respective affiliates’ financial interests tied to the consummation of a business combination transaction may give rise to potential conflicts of interest in providing any such additional services to Digital World, including potential conflicts of interest in connection with the sourcing and consummation of an initial business combination.

There are risks to Digital World stockholders who are not affiliates of the Sponsor of becoming stockholders of the Combined Entity through the Business Combination rather than acquiring securities of TMTG directly in an underwritten public offering, including no independent due diligence review by an underwriter and conflicts of interest of the Sponsor.

Because there is no independent third-party underwriter involved in the Business Combination or the issuance of common stock and warrants in connection therewith, investors will not receive the benefit of an outside independent review of Digital World’s and TMTG’s respective finances and operations performed in an initial public securities offering. Underwritten public offerings of securities conducted by a licensed broker-dealer are subjected to a due diligence review by the underwriter or dealer manager to satisfy statutory duties under the Securities Act, the rules of FINRA and the national securities exchange where such securities are listed. Additionally, underwriters or dealer-managers conducting such public offerings are subject to liability for any material misstatements or omissions in a registration statement filed in connection with the public offering. As no such review will be conducted in connection with the Business Combination, our stockholders must rely on the information in this proxy statement/prospectus and will not have the benefit of an independent review and investigation of the type normally performed by an independent underwriter in a public securities offering.

In addition, the Sponsor and Digital World’s executive officers and directors have interests in the Business Combination that may be different from, or in addition to, the interests of Digital World’s stockholders generally. Such interests may have influenced Digital World’s directors in making their recommendation that you vote in favor of the Business Combination Proposal and the other proposals described in this proxy statement/prospectus.

Changes in laws or regulations or how such laws or regulations are interpreted or applied, or a failure to comply with any laws or regulations, may adversely affect Digital World’s business, including its ability to negotiate and complete its initial business combination, and results of operations.

Digital World is and will be subject to laws and regulations enacted by national, regional and local governments and, potentially, foreign jurisdictions. In particular, Digital World will be required to comply with certain SEC and other legal requirements, its business combination may be contingent on its ability to comply with certain laws and regulations and any post-business combination company may be subject to additional laws and regulations. Compliance with, and monitoring of, applicable laws and regulations may be difficult, time consuming and costly. Those laws and regulations and their interpretation and application may also change from time to time, including as a result of changes in economic, political, social and government policies, and those

 

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changes could have a material adverse effect on Digital World’s business, including its ability to negotiate and complete its initial business combination, and results of operations. In addition, a failure to comply with applicable laws or regulations, as interpreted and applied, could have a material adverse effect on its business, including its ability to negotiate and complete its initial business combination, and results of operations.

On March 30, 2022, the SEC issued proposed rules relating to, among other items, enhancing disclosures in business combination transactions involving SPACs and private operating companies; amending the financial statement requirements applicable to transactions involving shell companies; effectively limiting the use of projections in SEC filings in connection with proposed business combination transactions; increasing the potential liability of certain participants in proposed business combination transactions; and the extent to which SPACs could become subject to regulation under the Investment Company Act of 1940. These rules, if adopted, whether in the form proposed or in revised form, may materially adversely affect Digital World’s ability to negotiate and complete its initial business combination and may increase the costs and time related thereto.

Digital World was in the past, and continues to be, subject to inquiries, exams, pending investigations, or enforcement matters.

Digital World is subject to regulation under federal, state, and applicable international laws. From time to time, Digital World may be threatened with or named as a defendant in lawsuits, arbitrations and administrative claims involving securities and other matters. Digital World is also subject to periodic regulatory examinations and inspections. Compliance and trading problems or other deficiencies or weaknesses that are reported to regulators, such as the SEC, FINRA or state regulators, or that are identified by regulators themselves, are investigated by such regulators, and may, if pursued, result in formal claims being filed against Digital World by customers or disciplinary action being taken against us by regulators or enforcement agencies.

To resolve issues raised in examinations or other governmental actions, Digital World may be required to take various corrective actions, including changing certain business practices, making refunds or taking other actions that could be financially or competitively detrimental to Digital World. Digital World expects to continue to incur costs to comply with governmental regulations. Any such claims or disciplinary actions that are decided against Digital World could have a material impact on its financial results.

Digital World is cooperating with a FINRA inquiry concerning events (specifically, a review of trading) that preceded the public announcement of the Merger Agreement. According to FINRA’s request, the inquiry should not be construed as an indication that FINRA has determined that any violations of Nasdaq rules or federal securities laws have occurred, nor as a reflection upon the merits of the securities involved or upon any person who effected transactions in such securities.

Digital World is also cooperating with an SEC investigation, including responding to a document request and subpoena from the SEC seeking various documents and information regarding, among other things, meetings of Digital World Board; communications with and the evaluation of potential targets, including TMTG; communications relating to TMTG; agreements with and payments made to certain advisors; investors, including investor meetings and agreements; the appointment of certain of Digital World’s officers and directors; policies and procedures relating to trading; and documents sufficient to identify banking, telephone, and email addresses. According to the SEC’s request and subpoena, the investigation does not mean that the SEC has concluded that anyone violated the law or that the SEC has a negative opinion of us or any person, entity, or security. Any resolution of the inquiry or investigation, as well as proceedings by the SEC, FINRA, or other governmental or regulatory authorities, could result in the imposition of significant fines, penalties, injunctions, prohibitions on the conduct of Digital World’s business, damage to its reputation and other sanctions against it, including restrictions on its activities. Digital World is cooperating with the SEC.

 

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Delaware law and New Digital World’s certificate of incorporation and bylaws will contain certain provisions, including anti-takeover provisions, that limit the ability of stockholders to take certain actions and could delay or discourage takeover attempts that stockholders may consider favorable.

The Amended Charter and New Digital World’s bylaws that will be in effect upon consummation of the Business Combination, and the DGCL, contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by New Digital World’s board of directors and therefore depress the trading price of New Digital World’s common stock. These provisions could also make it difficult for stockholders to take certain actions, including electing directors who are not nominated by the current members of the TMTG Board or taking other corporate actions, including effecting changes in the management of the Combined Entity. Among other things, the Amended Charter and New Digital World’s bylaws include provisions regarding:

 

   

a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of New Digital World’s board of directors;

 

   

the ability of New Digital World’s board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

 

   

the limitation of the liability of, and the indemnification of, New Digital World’s directors and officers;

 

   

the exclusive right of New Digital World’s board of directors to elect a director to fill a vacancy created by the expansion of New Digital World’s board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on New Digital World’s board of directors;

 

   

the requirement that directors may only be removed from New Digital World’s board of directors for cause;

 

   

a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of stockholders and could delay the ability of stockholders to force consideration of a stockholder proposal or to take action, including the removal of directors;

 

   

the requirement that a special meeting of stockholders may be called only by New Digital World’s board of directors, the chairperson of New Digital World’s board of directors, New Digital World’s chief executive officer or New Digital World’s president (in the absence of a chief executive officer), which could delay the ability of stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

   

the procedures for the conduct and scheduling of board of directors and stockholder meetings;

 

   

the requirement for the affirmative vote of holders of at least 2/3 of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend, alter, change or repeal any provision of the Amended Charter or New Digital World’s bylaws, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in New Digital World’s board of directors and also may inhibit the ability of an acquirer to effect such amendments to facilitate an unsolicited takeover attempt;

 

   

the ability of New Digital World’s board of directors to amend the bylaws, which may allow New Digital World’s board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend the bylaws to facilitate an unsolicited takeover attempt; and

 

   

advance notice procedures with which stockholders must comply to nominate candidates to New Digital World’s board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in New Digital World’s board of directors and also may discourage or

 

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deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of the Combined Entity.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in New Digital World’s board of directors or management.

Any provision of the Amended Charter, New Digital World’s bylaws or Delaware law that has the effect of delaying or preventing a change in control could limit the opportunity for stockholders to receive a premium for their shares of New Digital World’s capital stock and could also affect the price that some investors are willing to pay for New Digital World’s common stock.

The Amended Charter will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between New Digital World and its stockholders, and also provide that the federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, each of which could limit the ability of New Digital World’s stockholders to choose the judicial forum for disputes with New Digital World or its directors, officers, or employees.

The Amended Charter, which will become effective upon the Closing, will provide that, unless New Digital World consents in writing to the selection of an alternative forum, the sole and exclusive forum for (i) any derivative action or proceeding brought on its behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of its directors, officers, or other employees to New Digital World or its stockholders, (iii) any action arising pursuant to any provision of the DGCL, or the certificate of incorporation or the bylaws or (iv) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware), in all cases subject to the court having jurisdiction over indispensable parties named as defendants. The Amended Charter will also provide that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. The exclusive forum provision will be applicable to the fullest extent permitted by applicable law, subject to certain exceptions. Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. As a result, the exclusive forum provision will not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction. We note, however, that there is uncertainty as to whether a court would enforce this provision and that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. Section 22 of the Securities Act creates concurrent jurisdiction for state and federal courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder.

Any person or entity purchasing or otherwise acquiring any interest in any of New Digital World’s securities shall be deemed to have notice of and consented to this provision. This exclusive-forum provision may limit a stockholder’s ability to bring a claim in a judicial forum of its choosing for disputes with New Digital World or its directors, officers, or other employees, which may discourage lawsuits against New Digital World and its directors, officers, and other employees. If a court were to find the exclusive-forum provision to be inapplicable or unenforceable in an action, New Digital World may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm its results of operations.

In making your investment decision, you should not rely on information in public media that is published by third parties. You should rely only on statements made in this proxy statement/prospectus in determining whether to approve the Business Combination and acquire the Combined Entity’s shares of common stock.

You should carefully evaluate all of the information in this proxy statement/prospectus. Each of Digital World and TMTG has in the past received, and may continue to receive, a high degree of media coverage,

 

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including coverage that is not directly attributable to statements made by Digital World or TMTG’s officers and employees, that incorrectly reports on statements made by Digital World or TMTG’s officers or employees, or that is misleading. Much of this media coverage expresses opinion on the viability of TMTG’s business, the likelihood of the business combination being completed and other matters. You should rely only on the information contained in this proxy statement/prospectus in determining whether to approve the Business Combination and acquire the Combined Entity’s securities.

TMTG has broad discretion in the use of the net proceeds post-Closing and may not use them effectively.

TMTG cannot specify with any certainty the particular uses of the net proceeds that TMTG will receive pursuant to the Business Combination with Digital World. TMTG’s management will have broad discretion in the application of the net proceeds, including working capital, possible acquisitions, and other general corporate purposes, and TMTG may spend or invest these proceeds in a way with which the Combined Entity’s stockholders disagree. The failure by TMTG’s management to apply these funds effectively could harm TMTG’s business and financial condition. Pending their use, TMTG may invest the net proceeds from the offering in a manner that does not produce income or that loses value.

The Combined Entity’s disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

The Combined Entity is subject to certain reporting requirements of the Exchange Act. The Combined Entity’s disclosure controls and procedures will be designed to reasonably assure that information required to be disclosed in reports to file or submit under the Exchange Act is accumulated and communicated to management, recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. The Combined Entity believes that any disclosure controls and procedures or internal controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in the control system, misstatements, or insufficient disclosures due to error or fraud may occur and not be detected.

TMTG’s management team may not successfully or efficiently manage its transition to being a public company.

As a public company, TMTG will incur new obligations relating to its reporting, procedures, and internal controls. These new obligations and attendant scrutiny will require investments of significant time and energy from TMTG’s executives and could divert their attention away from the day-to-day management of TMTG’s business, which in turn could adversely affect TMTG’s financial condition or operating results.

The members of TMTG’s management team have extensive experience leading complex organizations. However, they have limited experience managing a publicly-traded company, interacting with public company investors, and complying with the increasingly complex laws, rules and regulations that specifically govern public companies.

TMTG has agreed to indemnify TMTG’s officers and directors against lawsuits to the fullest extent of the law.

TMTG is a Delaware corporation. Delaware law permits the indemnification of officers and directors against expenses incurred in successfully defending against a claim. Delaware law also authorizes Delaware corporations to indemnify their officers and directors against expenses and liabilities incurred because of their being or having been an officer or director. TMTG’s organizational documents provide for this indemnification to the fullest extent permitted by Delaware law.

 

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Prior to, and in no event not later than, the closing of the Business Combination, TMTG will obtain director and officer liability insurance to cover liabilities TMTG’s directors and key executive officers may incur in connection with their services to TMTG. There is no guarantee that such insurance coverage will protect TMTG from any damages or loss claims filed against it, or that such coverage will be available on reasonable economic terms satisfactory and acceptable to TMTG.

The underwriters of Digital World’s initial public offering may waive or release parties to the lock-up agreements entered into in connection with this Business Combination, which could adversely affect the price of the Combined Entity’s securities, including its common stock.

TMTG, all of TMTG’s directors and executive officers, and certain of TMTG’s other significant stockholders have entered or will enter into lock-up agreements pursuant to which TMTG and they will be subject to certain restrictions with respect to the sale or other disposition of the Combined Entity’s common stock for a period begin at Closing and end the earliest of: (i) the six-month anniversary of the Closing, (ii) on the date on which the closing stock price for New Digital World common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing, and (iii) such date on which New Digital World completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the New Digital World stockholders having the right to exchange their shares of New Digital World common stock for cash, securities or other property. The underwriters, at any time and without notice, may release all or any portion of the common stock subject to the foregoing lock-up agreements. See “Underwriting” for more information on these agreements. If the restrictions under the lock-up agreements are waived, then the common stock, subject to compliance with the Securities Act or exceptions therefrom, will be available for sale into the public markets, which could cause the market price of the Combined Entity’s common stock to decline and impair the Combined Entity’s ability to raise capital. Sales of a substantial number of shares upon expiration of the lock-up and market stand-off agreements, the perception that such sales may occur, or early release of these agreements, could cause the market price of Combined Entity’s common stock to fall or make it more difficult for you to sell your common stock at a time and price that you deem appropriate.

Anti-takeover effects of certain provisions of Delaware state law could hinder a potential takeover of the Combined Entity.

The Combined Entity is subject to statutory “anti-takeover” provisions under Delaware law; the provisions of Section 203 of the DGCL, an anti-takeover law. In general, Section 203 of the DGCL which may prohibit certain business combinations with stockholders owning 15% or more of the Combined Entity’s outstanding voting stock. These anti-takeover provisions and other provisions in the Combined Entity’s Amended Charter and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of the Combined Entity’s board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving the Combined Entity. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause the Combined Entity to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in the Combined Entity’s board of directors could cause the market price of the Combined Entity’s common stock to decline.

Certain provisions of the Combined Entity’s amended and restated bylaws are intended to strengthen the position of the Combined Entity’s board of directors in the event of a hostile takeover attempt. These provisions have the effect of providing the Combined Entity’s board of directors with the sole power to fill vacancies on the Combined Entity’s board of directors and providing that stockholders may only call a special meeting by the request, in writing, of stockholders owning individually or together ten percent (10%) or more of the entire capital stock of the corporation issued and outstanding and entitled to vote.

Therefore, the provisions of the Control Share Acquisition Act do not apply to acquisitions of the Combined Entity’s shares and will not until such time as these requirements have been met. At such time as they may apply

 

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to us, the provisions of the Control Share Acquisition Act may discourage companies or persons interested in acquiring a significant interest in or control of the Combined Entity, regardless of whether such acquisition may be in the interest of the Combined Entity’s stockholders.

The Combined Entity may include provisions in its certificate of incorporation that may discourage a third party from making a proposal to acquire us, even if some of its stockholders might consider the proposal to be in their best interests. For example, the Combined Entity may amend its certificate of incorporation to authorize its board of directors to issue one (1) or more classes or series of preferred stock that could discourage or delay a tender offer or change in control. In addition, the Combined Entity may enter into a stockholder rights plan, commonly known as a “poison pill,” that may delay or prevent a change of control.

Provisions in the Amended Charter and Delaware law may have the effect of discouraging lawsuits against the Combined Entity directors and officers.

The Amended Charter requires, unless the Combined Entity consents in writing to the selection of an alternative forum, that (i) any derivative action or proceeding brought on the Combined Entity’s behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee to the Combined Entity or the Combined Entity’s stockholders, (iii) any action asserting a claim against the Combined Entity, the Combined Entity’s directors, officers or employees arising pursuant to any provision of the DGCL or the Amended Charter or the Combined Entity’s bylaws, or (iv) any action asserting a claim against the Combined Entity, the Combined Entity’s directors, officers or employees governed by the internal affairs doctrine may be brought only in the Court of Chancery in the State of Delaware, except any claim (A) as to which the Court of Chancery of the State of Delaware determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), (B) which is vested in the exclusive jurisdiction of a Court or forum other than the Court of Chancery or (C) for which the Court of Chancery does not have subject matter jurisdiction. If an action is brought outside of Delaware, the stockholder bringing the suit will be deemed to have consented to service of process on such stockholder’s counsel. Although the Combined Entity believes this provision benefits us by providing increased consistency in the application of Delaware law in the types of lawsuits to which it applies, a Court may determine that this provision is unenforceable, and to the extent it is enforceable, the provision may have the effect of discouraging lawsuits against the Combined Entity’s directors and officers, although the Combined Entity’s stockholders will not be deemed to have waived the Combined Entity’s compliance with federal securities laws and the rules and regulations thereunder.

The Combined Entity’s bylaws further provide that, unless the Combined Entity consents in writing to an alternative forum, the United States District Court for the Southern District of Florida will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. The Combined Entity’s bylaws also provide that any person or entity purchasing or otherwise acquiring any interest in shares of the Combined Entity’s capital stock will be deemed to have notice of and to have consented to this choice of forum provision. The Combined Entity recognizes that the forum selection clause in the Combined Entity’s bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Florida. Additionally, the forum selection clause in the Combined Entity’s bylaws may limit the Combined Entity’s stockholders’ ability to bring a claim in a forum that they find favorable for disputes with us or the Combined Entity’s directors, officers or employees, which may discourage such lawsuits against us and the Combined Entity’s directors, officers and employees even though an action, if successful, might benefit the Combined Entity’s stockholders. If a court were to find these exclusive-forum provisions in the Combined Entity’s certificate of incorporation or bylaws to be inapplicable or unenforceable in an action, the Combined Entity may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm the Combined Entity’s business. Nothing in the Combined Entity’s certificate of incorporation or bylaws will preclude stockholders that assert claims under the Securities Act or the Exchange Act from bringing such claims in state or federal court, subject to applicable law.

 

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Following the consummation of the Business Combination, New Digital World will incur significant increased expenses and administrative burdens as a public company, which could have an adverse effect on its business, financial condition and results of operations.

Following the consummation of the Business Combination, New Digital World will face increased legal, accounting, administrative and other costs and expenses as a public company that TMTG does not incur as a private company. The Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and the rules and regulations promulgated and to be promulgated thereunder, Public Company Accounting Oversight Board (the “PCAOB”) and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements will increase costs and make certain activities more time-consuming. A number of those requirements will require New Digital World to carry out activities TMTG has not done previously. For example, New Digital World will create new board committees and adopt new internal controls and disclosure controls and procedures. In addition, expenses associated with SEC reporting requirements will be incurred. Furthermore, if any issues in complying with those requirements are identified, New Digital World could incur additional costs rectifying those issues, and the existence of those issues could adversely affect New Digital World’s reputation or investor perceptions of it. It may also be more expensive to obtain director and officer liability insurance. Risks associated with New Digital World’s status as a public company may make it more difficult to attract and retain qualified persons to serve on the New Digital World Board or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require New Digital World to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.

If third parties bring claims against Digital World, the proceeds held in trust could be reduced and the per-share redemption price received by stockholders may be less than $10.20 per share.

Digital World’s placing of funds in trust may not protect those funds from third party claims against Digital World. Although Digital World has sought to have all vendors and service providers it engages and prospective target businesses it negotiated with execute agreements with Digital World waiving any right, title, interest or claim of any kind in or to any monies held in the Trust Account for the benefit of Digital World’s public stockholders, they may not execute such agreements. Furthermore, even if such entities execute such agreements with Digital World, they may seek recourse against the Trust Account. A court may not uphold the validity of such agreements. Accordingly, the proceeds held in trust could be subject to claims which could take priority over those of Digital World’s public stockholders. If Digital World is unable to complete a business combination and distribute the proceeds held in trust to Digital World’s public stockholders, the Sponsor has agreed (subject to certain exceptions described elsewhere in this proxy statement/prospectus) that it will be liable to ensure that the proceeds in the Trust Account are not reduced below $10.20 per share by the claims of target businesses or claims of vendors or other entities that are owed money by Digital World for services rendered or contracted for or products sold to Digital World. However, it may not be able to meet such obligation. Therefore, the per-share distribution from the Trust Account may be less than $10.20, plus interest, due to such claims.

Additionally, if Digital World is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against Digital World’s which is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in Digital World’s bankruptcy estate and subject to the claims of third parties with priority over the claims of Digital World’s stockholders. To the extent any bankruptcy claims deplete the Trust Account, Digital World may not be able to return to Digital World’s public stockholders at least $10.20. The Sponsor may not have sufficient funds to satisfy its indemnity obligations, as its only assets are securities of Digital World. Digital World has not asked the Sponsor to reserve for such indemnification obligations. As a result, if any such claims were successfully made against the Trust Account, the funds available

 

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for Digital World’s initial business combination, including the Business Combination, and redemptions could be reduced to less than $10.20 per public share.

Our directors may decide not to enforce the indemnification obligations of our Sponsor, resulting in a reduction in the amount of funds in the Trust Account available for distribution to our public stockholders.

In the event that the proceeds in the Trust Account are reduced below the lesser of (i) $10.20 per public share and (ii) the actual amount per share held in the Trust Account as of the date of the liquidation of the Trust Account if less than $10.20 per share due to reductions in the value of the trust assets, in each case net of the interest which may be withdrawn to pay taxes, and our Sponsor asserts that it is unable to satisfy its obligations or that it has no indemnification obligations related to a particular claim, our independent directors would determine whether to take legal action against our Sponsor to enforce its indemnification obligations. While we currently expect that our independent directors would take legal action on our behalf against our Sponsor to enforce its indemnification obligations to us, it is possible that our independent directors in exercising their business judgment and subject to their fiduciary duties may choose not to do so in any particular instance if, for example, the cost of such legal action is deemed by the independent directors to be too high relative to the amount recoverable or if the independent directors determine that a favorable outcome is not likely. If our independent directors choose not to enforce these indemnification obligations, the amount of funds in the Trust Account available for distribution to our public stockholders may be reduced below $10.20 per share.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the claims of creditors in such proceeding may have priority over the claims of our stockholders and the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, before distributing the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in our bankruptcy estate and subject to the claims of third parties with priority over the claims of our stockholders. To the extent any bankruptcy claims deplete the Trust Account, the per-share amount that would otherwise be received by our stockholders in connection with our liquidation may be reduced.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, a bankruptcy court may seek to recover such proceeds, and we and our Board may be exposed to claims of punitive damages.

If, after we distribute the proceeds in the Trust Account to our public stockholders, we file a bankruptcy petition or an involuntary bankruptcy petition is filed against us that is not dismissed, any distributions received by stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by our stockholders. In addition, our Board may be viewed as having breached its fiduciary duty to our creditors and/or having acted in bad faith, thereby exposing itself and us to claims of punitive damages, by paying public stockholders from the Trust Account prior to addressing the claims of creditors.

If New Digital World does not file and maintain a current and effective prospectus relating to the common stock issuable upon exercise of the warrants, holders will only be able to exercise such warrants on a “cashless basis.”

If New Digital World does not file and maintain a current and effective prospectus relating to the common stock issuable upon exercise of the warrants at the time that holders wish to exercise such warrants, they will only be able to exercise them on a “cashless basis” provided that an exemption from registration is available. As a result, the number of shares of common stock that holders will receive upon exercise of the warrants will be

 

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fewer than it would have been had such holder exercised its warrant for cash. Further, if an exemption from registration is not available, holders would not be able to exercise on a cashless basis and would only be able to exercise their warrants for cash if a current and effective prospectus relating to the common stock issuable upon exercise of the warrants is available. Under the terms of the warrant agreement, New Digital World has agreed to use its best efforts to meet these conditions and to file and maintain a current and effective prospectus relating to the common stock issuable upon exercise of the warrants until the expiration of the warrants. However, New Digital World cannot assure you that it will be able to do so. If New Digital World is unable to do so, the potential “upside” of the holder’s investment in New Digital World may be reduced or the warrants may expire worthless.

Even if Digital World consummates the Business Combination, there is no guarantee that the warrants will ever be in the money; they may expire worthless or the terms of warrants may be amended.

The exercise price for the warrants is $11.50 per share of common stock. There is no guarantee that the Public Warrants will ever be in the money prior to their expiration, and as such, the warrants may expire worthless.

In addition, Digital World’s warrants were issued in registered form under a warrant agreement between Continental Stock Transfer & Trust Company, as warrant agent, and Digital World. The warrant agreement provides that the terms of the warrants may be amended without the consent of any holder to cure any ambiguity or correct any defective provision, but requires the approval by the holders of at least a majority of the then outstanding Public Warrants to make any other change. Accordingly, Digital World may amend the terms of the warrants in a manner adverse to a holder if holders of at least a majority of the then outstanding Public Warrants approve of such amendment. Although Digital World’s ability to amend the terms of the warrants with the consent of at least a majority of the then outstanding Public Warrants is unlimited, examples of such amendments could be amendments to, among other things, increase the exercise price of the warrants, shorten the exercise period or decrease the number of shares and their respective affiliates and associates have of common stock purchasable upon exercise of a warrant.

Digital World’s warrant agreement designates the courts of the State of New York or the United States District Court for the Southern District of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by holders of Digital World’s warrants, which could limit the ability of warrant holders to obtain a favorable judicial forum for disputes with Digital World.

Digital World’s warrant agreement will provide that, subject to applicable law, (i) any action, proceeding or claim against Digital World arising out of or relating in any way to the warrant agreement, including under the Securities Act, will be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and (ii) that Digital World irrevocably submits to such jurisdiction, which jurisdiction shall be the exclusive forum for any such action, proceeding or claim. Digital World will waive any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

Notwithstanding the foregoing, these provisions of the warrant agreement will not apply to suits brought to enforce any liability or duty created by the Exchange Act or any other claim for which the federal district courts of the United States of America are the sole and exclusive forum. Any person or entity purchasing or otherwise acquiring any interest in any of Digital World’s warrants shall be deemed to have notice of and to have consented to the forum provisions in Digital World’s warrant agreement. If any action, the subject matter of which is within the scope the forum provisions of the warrant agreement, is filed in a court other than a court of the State of New York or the United States District Court for the Southern District of New York (a “foreign action”) in the name of any holder of Digital World’s warrants, such holder shall be deemed to have consented to: (x) the personal jurisdiction of the state and federal courts located in the State of New York in connection with any action brought in any such court to enforce the forum provisions (an “enforcement action”), and (y) having service of process made upon such warrant holder in any such enforcement action by service upon such warrant holder’s counsel in the foreign action as agent for such warrant holder.

 

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This choice-of-forum provision may limit a warrant holder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with Digital World, which may discourage such lawsuits. Alternatively, if a court were to find this provision of Digital World’s warrant agreement inapplicable or unenforceable with respect to one or more of the specified types of actions or proceedings, Digital World’s may incur additional costs associated with resolving such matters in other jurisdictions, which could materially and adversely affect Digital World’s business, financial condition and results of operations and result in a diversion of the time and resources of Digital World’s management and board of directors.

Digital World has no obligation to net cash settle the warrants.

In no event will Digital World have any obligation to net cash settle the warrants. Furthermore, there are no contractual penalties for failure to deliver securities to the holders of warrants upon consummation of an initial business combination, including the Business Combination, or exercise of the warrants. Accordingly, the warrants may expire worthless.

We may waive one or more of the conditions to the Business Combination.

We may agree to waive, in whole or in part, one or more of the conditions to our obligations to complete the Business Combination, to the extent permitted by our current amended and restated certificate of incorporation and bylaws and applicable laws. We may not waive the condition that our stockholders approve the Business Combination. Please see the section entitled “The Business Combination Proposal (Proposal 1) — General Description of the Merger Agreement — Conditions to the Closing” for additional information.

The exercise of discretion by our directors and officers in agreeing to changes to the terms of or waivers of closing conditions in the Merger Agreement may result in a conflict of interest when determining whether such changes to the terms of the Merger Agreement or waivers of conditions are appropriate and in the best interests of our stockholders.

In the period leading up to the Closing, other events may occur that, pursuant to the Merger Agreement, would require Digital World to agree to amend the Merger Agreement to consent to certain actions or to waive rights that we are entitled to under those agreements. Such events could arise because of changes in the course of TMTG’s business, a request by TMTG to undertake actions that would otherwise be prohibited by the terms of the Merger Agreement or the occurrence of other events that would have a material adverse effect on TMTG’s business and would entitle Digital World to terminate the Merger Agreement, as applicable. In any of such circumstances, it would be in the discretion of Digital World, acting through its Board, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described elsewhere in this proxy statement/prospectus may result in a conflict of interest on the part of one or more of the directors between what he or she may believe is best for Digital World and our stockholders and what he or she may believe is best for himself or herself or his or her affiliates in determining whether or not to take the requested action. As of the date of this proxy statement/prospectus, we do not believe there will be any changes or waivers that our directors and officers would be likely to make after stockholder approval of the Business Combination has been obtained. While certain changes could be made without further stockholder approval, if there is a change to the terms of the Business Combination that would have a material impact on the stockholders, we will be required to circulate a new or amended proxy statement or supplement thereto and resolicit the vote of our stockholders with respect to the Business Combination Proposal.

The Combined Entity may redeem the unexpired warrants prior to their exercise at a time that is disadvantageous to warrant holders, thereby making their warrants worthless.

The Combined Entity has the ability to redeem outstanding warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01per warrant, provided that the last reported sales price of the common stock equals or exceeds $18.00 per share for any 20 trading days within a 30 trading-day period

 

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ending on the third trading day prior to the date the Combined Entity sends the notice of redemption to the warrant holders. If and when the warrants become redeemable by the Combined Entity, the Combined Entity may exercise its redemption right even if the Combined Entity is unable to register or qualify the underlying securities for sale under all applicable state securities laws. Additionally, ninety (90) days after the warrants become exercisable, New Digital World may redeem all (but not less than all) of the outstanding warrants at $0.01 per warrant upon a minimum of 30 days’ prior written notice of redemption (during which time the holders may exercise their warrants prior to redemption for the number of shares set forth in the table under the section captioned “Description of Securities — Warrants — Redemption of Warrants — Redemption of Warrants for common stock”) if the following conditions are satisfied: (i) the last reported sale prices of the New Digital World common stock equals or exceeds $10.20 (as may be adjusted for stock splits, stock dividends, reorganizations, recapitalizations or the like) on the trading day prior to the date of the notice; (ii) the private placement warrants are also concurrently exchanged at the same price as the outstanding Public Warrants; and (iii) there is an effective registration statement covering the issuance of the shares of New Digital World common stock issuable upon exercise of the warrants and a current prospectus relating thereto available throughout the 30-day period after written notice of redemption is given. In either case, redemption of the outstanding warrants could force you (i) to exercise your warrants and pay the exercise price therefor at a time when it may be disadvantageous for you to do so, (ii) to sell your warrants at the then-current market price when you might otherwise wish to hold your warrants or (iii) to accept the nominal redemption price which, at the time the outstanding warrants are called for redemption, is likely to be substantially less than the market value of your warrants.

We have not registered the shares of common stock issuable upon exercise of the Public Warrants under the Securities Act or any state securities laws at this time, and such registration may not be in place when an investor desires to exercise Public Warrants, thus precluding such investor from being able to exercise its Public Warrants except on a cashless basis and potentially causing such Public Warrants to expire worthless.

We have not registered the shares of common stock issuable upon exercise of the Public Warrants under the Securities Act or any state securities laws at this time. However, under the terms of the warrant agreement, we have agreed that as soon as practicable, but in no event later than 15 business days after the closing of our initial business combination, we will use our best efforts to file with the SEC a registration statement for the registration under the Securities Act of the shares of common stock issuable upon exercise of the warrants and thereafter will use our best efforts to cause the same to become effective within 60 business days following our initial business combination and to maintain a current prospectus relating to the common stock issuable upon exercise of the Public Warrants, until the expiration of the Public Warrants in accordance with the provisions of the warrant agreement. We cannot assure you that we will be able to do so if, for example, any facts or events arise which represent a fundamental change in the information set forth in the registration statement or prospectus, the financial statements contained or incorporated by reference therein are not current or correct or the SEC issues a stop order. If the shares issuable upon exercise of the Public Warrants are not registered under the Securities Act, we will be required to permit holders to exercise their Public Warrants on a cashless basis. However, no Public Warrant will be exercisable for cash or on a cashless basis, and we will not be obligated to issue any shares to holders seeking to exercise their Public Warrants, unless the issuance of the shares upon such exercise is registered or qualified under the securities laws of the state of the exercising holder or an exemption from registration is available. Notwithstanding the above, if our common stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that it satisfies the definition of a “covered security” under Section 18(b)(1) of the Securities Act, we may, at our option, require holders of Public Warrants who exercise their Public Warrants to do so on a “cashless basis” in accordance with Section 3(a)(9) of the Securities Act and, in the event we so elect, we will not be required to file or maintain in effect a registration statement, and in the event we do not so elect, we will use our best efforts to register or qualify the shares under applicable blue sky laws to the extent an exemption is not available. In no event will we be required to net cash settle any Public Warrant, or issue securities or other compensation in exchange for the Public Warrants in the event that we are unable to register or qualify the shares underlying the Public Warrants under applicable state securities laws and there is no exemption available. If the issuance of the shares upon exercise of the Public

 

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Warrants is not so registered or qualified or exempt from registration or qualification, the holder of such Public Warrant shall not be entitled to exercise such Public Warrant and such Public Warrant may have no value and expire worthless. In such event, holders who acquired their Public Warrants as part of a purchase of public units will have paid the full unit purchase price solely for the shares of common stock included in the public units. If and when the Public Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. We will use our best efforts to register or qualify such shares of common stock under the blue sky laws of the state of residence in those states in which the warrants were offered by us in the IPO. However, there may be instances in which holders of our Public Warrants may be unable to exercise such Public Warrants but holders of our private warrants may be able to exercise such private warrants.

The Combined Entity may be a “controlled company” within the meaning of the applicable rules of Nasdaq and, as a result, may qualify for exemptions from certain corporate governance requirements. If the Combined Entity relies on these exemptions, its stockholders will not have the same protections afforded to stockholders of companies that are subject to such requirements.

Upon the Closing, depending on the number of shares of common stock redeemed by the Combined Entity’s public stockholders, the former TMTG equity holders may control a majority of the voting power of the Combined Entity’s outstanding common stock, and the Company may then be a “controlled company” within the meaning of applicable rules of Nasdaq upon the Closing of the Business Combination. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including the requirements:

 

   

that a majority of the board consists of independent directors;

 

   

for an annual performance evaluation of the nominating and corporate governance and compensation committees;

 

   

that the controlled company has a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

 

   

that the controlled company has a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibility.

While TMTG does not intend to rely on these exemptions, the Combined Entity may use these exemptions now or in the future. As a result, the Combined Entity’s stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the Nasdaq corporate governance requirements.

The future exercise of registration rights may adversely affect the market price of our common stock.

Certain of our stockholders will have registration rights for restricted securities. We are obligated to register certain securities, including all of the shares of common stock held by the Sponsor and shares of common stock received by certain significant TMTG stockholders as part of the Business Combination. We are obligated to (i) file a resale “shelf” registration statement to register such securities (and any shares of TMTG common stock into which they may be exercised following the consummation of the Business Combination) within 15 business days after of the Closing and (ii) use reasonable best efforts to cause such registration statement to be declared effective by the SEC as soon as reasonably practicable after the filing. In addition, we are obligated to register all of the shares of common stock issuable upon conversion of the Preferred Stock issued in the PIPE Investment. The Preferred Stock is initially convertible into 29,761,905 shares of common stock. We will file a registration statement with respect to all of those shares that we have agreed to have declared effective on the closing of the initial business combination. Sales of a substantial number of shares of common stock pursuant to the resale registration statement in the public market could occur at any time the registration statement remains effective. In

 

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addition, certain registration rights holders can request underwritten offerings to sell their securities. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock.

We do not have a specified maximum redemption threshold. The absence of such a redemption threshold may make it possible for us to complete a Business Combination with which a substantial majority of our stockholders do not agree.

Our current amended and restated certificate of incorporation does not provide a specified maximum redemption threshold, except that we will not redeem our public shares in an amount that would cause the Company’s net tangible assets to be less than $5,000,001 upon consummation of our initial business combination (such that we are not subject to the SEC’s “penny stock” rules). However, the Merger Agreement provides that the obligation of TMTG to consummate the Business Combination is conditioned on the amount of cash or cash equivalents that we have from any source equals or exceeds $60 million, including the cash available to Digital World from the Trust Account (after any redemptions by the Digital World stockholders and the payment of any deferred underwriting expenses of Digital World not related to the Business Combination) and the proceeds from the $1 billion PIPE Investment. As a result, we expect to be able to complete our Business Combination and satisfy the above-referenced cash and net tangible asset closing conditions, even though a portion of our public stockholders do not agree with the transaction and have redeemed their shares or have entered into privately negotiated agreements to sell their shares to our Sponsor, directors or officers or their affiliates. As of the date of this proxy statement/prospectus, no agreements with respect to the private purchase of public shares by the Combined Entity or the persons described above have been entered into with any such investor or holder. We will file a Current Report on Form 8-K with the SEC to disclose private arrangements entered into or significant private purchases made by any of the aforementioned persons that would affect the vote on the Business Combination Proposal or other proposals (as described in this proxy statement/prospectus) at the special meeting.

In the event the aggregate cash consideration we would be required to pay for all shares of common stock that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Merger Agreement exceeds the aggregate amount of cash available to us, we may not complete the Business Combination or redeem any shares, all shares of common stock submitted for redemption will be returned to the holders thereof, and we instead may search for an alternate business combination.

There may be sales of a substantial amount of the Combined Entity’s common stock after the Business Combination by Digital World’s current stockholders, and these sales could cause the price of the Combined Entity’s common stock to fall.

After the Business Combination, on a pro forma basis, there will be approximately 126.9 million shares of common stock outstanding (assuming no redemptions by Digital World stockholders). In addition, we are obligated to have a registration statement declared effective covering all of the shares of common stock issuable upon conversion of the Preferred Stock sold in the PIPE at the time of closing of the Business Combination (the “Initial Registration Statement”). The Preferred Stock is initially convertible into 29,761,905 shares of common stock. Of Digital World’s issued and outstanding shares that were issued prior to the Business Combination, all will be freely transferable, except for any shares held by Digital World’s “affiliates,” as that term is defined in Rule 144 under the Securities Act. Following completion of the Business Combination, and prior to the PIPE, approximately 6.2% of the Combined Entity’s outstanding common stock will be held by the Sponsor. This percentage does not take into account (i) the issuance of up to              million shares (or options to acquire shares) under the Equity Incentive Plan, (ii) the issuance of any shares upon the exercise of warrants to purchase up to a total of 15,685,790 shares of common stock that will remain outstanding following the Business Combination or any additional Placement Warrants that Digital World may issue to the Sponsor to repay working capital loans owed by Digital World to the Sponsor (currently none outstanding), (iii) any shares of common stock surrendered by former TMTG securityholders after the consummation of the Business Combination as

 

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indemnification payments pursuant to the terms of the Merger Agreement, or (iv) and shares issuable upon conversion of the Preferred Stock.

Future sales of the Combined Entity’s common stock may cause the market price of its securities to drop significantly, even if its business is doing well.

Digital World entered into a registration rights agreement with respect to the Founder Shares, shares of Digital World common stock underlying the Placement Warrants and all shares issued to a holder with respect to the securities referred above by way of any stock split, stock dividend, recapitalization, combination of shares, acquisition, consolidation, reorganization, share exchange, or similar event, which securities Digital World collectively refer to as “registrable securities.” Under the registration rights agreement, Digital World has agreed to register for resale under a registration statement all of the shares held by holders of Founder Shares and issuable upon conversion of Digital World warrants. The Sponsor is also entitled to a number of demand registration rights. Holders of registrable securities will also have certain “piggyback” registration rights with respect to registration statements filed subsequent to the Business Combination.

In addition, Digital World is obligated to register all of the shares of common stock issuable upon conversion of the Preferred Stock issued in the PIPE. The Preferred Stock is initially convertible into 29,761,905 shares of common stock. We will file a registration statement with respect to all of those shares that we have agreed to have declared effective on the closing of the initial business combination, subject to certain conditions.

On December 4, 2021, in support of the Business Combination, Digital World entered into SPAs with the PIPE Investors, pursuant to which the PIPE Investors agreed to purchase an aggregate of 1,000,000 shares of Digital World’s Preferred Stock, for a purchase price of $1,000 per share of Preferred Stock, for an aggregate commitment of $1,000,000,000 in the PIPE to be consummated concurrently with the Closing. The shares of Preferred Stock have an initial conversion price per share of $33.60 and are initially convertible into an aggregate of 29,761,905 shares of common stock, subject to adjustment, as described below. The closing of the PIPE is conditioned on the concurrent closing of the Business Combination and other closing conditions as set forth in the SPA.

If Digital World is unable to include all the shares of common stock issuable upon conversion of the Preferred Stock in the Initial Registration Statement, at the time of filing of each subsequent registration statement, the then current conversion price is subject to downward adjustment based on the formula set forth in the SPA, where the 10-day VWAP is measured from the 10-day period following the effective date of the applicable registration statement, so that upon each Conversion Price Adjustment, for so long as a holder still holds any shares of Preferred Stock (including, for the avoidance of doubt, a single share or any fraction of a single share), the Preferred Stock held by such holder shall subsequently be convertible into the number of shares of common stock such that the holder will be entitled to the aggregate number of shares of common stock based on its initial purchase of Preferred Stock pursuant to the SPA convertible at the conversion price then in effect following the applicable Conversion Price Adjustment. The conversion price is set to automatically adjust downward in accordance with the SPA. Public Stockholders will experience dilution as a consequence of, among other transactions, the issuance of Common Stock to preferred stockholders as consideration in the PIPE Investment in accordance with the Conversion Price Adjustment. The dilution may put a downward pressure on the common stock price and adversely affect the market price for the common stock.

Upon effectiveness of the registration statements Digital World files pursuant to the registration rights agreements, these parties may sell large amounts of Digital World common stock in the open market or in privately negotiated transactions, which could have the effect of increasing the volatility in Digital World’s stock price or putting significant downward pressure on the price of Digital World common stock.

Sales of substantial amounts of Digital World common stock in the public market after the Business Combination, or the perception that such sales will occur, could adversely affect the market price of Digital World common stock and make it difficult for it to raise funds through securities offerings in the future.

 

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Future resales of New Digital World’s common stock after the consummation of the Business Combination may cause the market price of New Digital World’s securities to drop significantly, even if New Digital World’s business is doing well.

In connection with the Business Combination, certain TMTG Stockholders and certain of TMTG’s officers and directors entered into a lock-up agreement pursuant to which they will be contractually restricted from selling or transferring any of (i) their shares of New Digital World’s common stock held immediately following the Closing and (ii) any of their shares of New Digital World’s common stock that result from converting securities held immediately following the Closing (the “Lock-up Shares”). Such restrictions begin at Closing and end the earliest of: (i) the six-month anniversary of the Closing, (ii) on the date on which the closing stock price for New Digital World common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing, and (iii) such date on which New Digital World completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the New Digital World stockholders having the right to exchange their shares of New Digital World common stock for cash, securities or other property.

The Sponsor is subject to a lock-up pursuant to a letter agreement, entered into at the time of the IPO, among Digital World, the Sponsor and the other parties thereto, pursuant to which the Sponsor is subject to a lock-up beginning on the Closing and end the earliest of: (i) the six-month anniversary of the Closing, (ii) on the date on which the closing stock price for New Digital World common stock equals or exceeds $12.00 per share for any 20 trading days within any 30-trading day period commencing at least 150 days after the Closing, and (iii) such date on which Digital World completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the Digital World stockholders having the right to exchange their shares of Digital World common stock for cash, securities or other property.

However, following the expiration of such lock-ups, the Sponsor and the holders of Lock-Up Shares will not be restricted from selling shares of New Digital World’s common stock held by them, other than by applicable securities laws. Additionally, the PIPE Investors will not be restricted from selling any of their shares of New Digital World’s common stock following the closing of the Business Combination, other than by applicable securities laws. As such, sales of a substantial number of shares of New Digital World common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of New Digital World common stock. Upon completion of the Business Combination, the Sponsor and the holders of Lock-Up Shares (including the shares of New Digital World common stock issued as awards as a result of conversion of TMTG common stock that were reserved for issuance pursuant to TMTG’s outstanding stock options and unvested restricted stock units outstanding as of immediately prior to the Closing) will collectively beneficially own approximately ____% of the outstanding shares of New Digital World common stock, assuming that no additional public stockholders redeem their public shares in connection with the Business Combination. Assuming approximately 28.75 million public shares are redeemed in connection with the Business Combination, in the aggregate, the ownership of the Sponsor and the TMTG Stockholders would rise to ____% of the outstanding shares of New Digital World common stock (including the shares of TMTG common stock reserved in respect of TMTG’s outstanding stock options and unvested restricted stock units outstanding as of immediately prior to the Closing that will be converted into awards based on New Digital World common stock).

The shares held by Sponsor and the Lock-Up Stockholders may be sold after the expiration of their applicable lock-up periods. As restrictions on resale end and registration statements (filed after the Closing to provide for the resale of such shares from time to time) are available for use, the sale or possibility of sale of these shares could have the effect of increasing the volatility in New Digital World’s share price or the market price of New Digital World common stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them.

 

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If the adjournment proposal is not approved, and an insufficient number of votes have been obtained to authorize the consummation of the Business Combination, the Board will not have the ability to adjourn the meeting to a later date in order to solicit further votes, and, therefore, the Business Combination will not be approved.

The Board is seeking approval to adjourn the meeting to a later date or dates if, at the meeting, the business combination proposal is not approved. If the adjournment proposal is not approved, the Board will not have the ability to adjourn the meeting to a later date and, therefore, the Business Combination would not be completed.

Digital World and TMTG have incurred and expect to incur significant costs associated with the Business Combination. Whether or not the Business Combination is completed, the incurrence of these costs will reduce the amount of cash available to be used for other corporate purposes by Digital World if the Business Combination is not completed.

Digital World and TMTG expect to incur significant transaction and transition costs associated with the Business Combination and operating as a public company following the Closing. Digital World and TMTG may also incur additional costs to retain key employees. Certain transaction expenses incurred in connection with the Merger Agreement, including all legal, accounting, consulting, investment banking and other fees, expenses and costs, will be paid by New Digital World following the Closing. As disclosed in Notes to the Unaudited Pro Forma Condensed Combined Financial Information, expected transaction costs in consummating the Business Combination and related transactions are approximately $12.3 million, approximately $9.3 million of which are attributable to Digital World and approximately $3.0 million of which are attributable to TMTG. Even if the Business Combination is not completed, Digital World expects to incur approximately $4.0 million in expenses. These expenses will reduce the amount of cash available to be used for other corporate purposes by Digital World if the Business Combination is not completed.

If the funds held outside of Digital World’s Trust Account are insufficient to allow it to operate until at least September 8, 2022 (or up to March 8, 2023 if Digital World extends the maximum time to complete an initial business combination), Digital World’s ability to complete an initial business combination may be adversely affected.

Digital World believes the funds available to it outside of the Trust Account will be sufficient to allow it to operate until it completes its business combination; however, Digital World cannot assure you that its estimate is accurate. If Digital World is required to seek additional capital, it would need to borrow funds from the Sponsor, management team or other third parties to operate or may be forced to liquidate. Neither the Sponsor, members of Digital World’s management team nor any of their affiliates is under any obligation to advance funds to Digital World in such circumstances. Any such advances would be repaid only from funds held outside the Trust Account or from funds released to Digital World upon completion of Digital World’s initial business combination. Up to $30,000,000 of such loans may be convertible into Working Capital Units at a price of $10.00 per unit at the option of the lender. The additional Working Capital Units beyond the Working Capital Units underlying the initial $1,500,000 in working capital loans as described in the Digital World’s IPO prospectus will only be issuable upon the approval of Digital Word’s stockholders. The Working Capital Units would be identical to the Placement Units. As of December 31, 2021, there were no outstanding working capital loans. Prior to the completion of Digital World’s initial business combination, it does not expect to seek loans from parties other than the Sponsor or an affiliate of the Sponsor as Digital World does not believe third parties will be willing to loan such funds and provide a waiver against any and all rights to seek access to funds in the Trust Account. If Digital World is unable to complete its initial business combination because it does not have sufficient funds available to it, Digital World will be forced to cease operations and liquidate the Trust Account. Consequently, Digital World’s public stockholders may only receive an estimated $10.20 per share, or possibly less, on its redemption of its public shares, and its warrants will expire worthless.

 

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Digital World’s independent registered public accounting firm’s report contains an explanatory paragraph that expresses substantial doubt about Digital World’s ability to continue as a going concern, since Digital World will cease all operations except for the purpose of liquidating if it is unable to complete an initial business combination by September 8, 2022 (or March 8, 2023, if Digital World has extended the maximum time).

As of March 31, 2022, Digital World had in cash held outside of the Trust Account for its $41,492 working capital needs. Digital World has incurred and expects to continue to incur significant costs in pursuit of its acquisition plans. Digital World may need to raise additional funds in order to meet the expenditures required for operating its business. Further, if Digital World’s estimates of the costs of identifying a target business, undertaking in-depth due diligence and negotiating an initial business combination are less than the actual amount necessary to do so, Digital World may have insufficient funds available to operate its business prior to its initial business combination. Moreover, Digital World may need to obtain additional financing either to complete its initial business combination or because it becomes obligated to redeem a significant number of its public shares upon completion of its initial business combination, in which case it may issue additional securities or incur debt in connection with such business combination. Subject to compliance with applicable securities laws, Digital World would only complete such financing simultaneously with the completion of its initial business combination. If Digital World is unable to complete its initial business combination because it does not have sufficient funds available to it, it will be forced to cease operations and liquidate the Trust Account. In addition, following Digital World’s initial business combination, if cash on hand is insufficient, Digital World may need to obtain additional financing in order to meet its obligations. While Digital World intends to complete the Business Combination before September 8, 2022 (or March 8, 2023, if Digital World has extended the time it has to complete a business combination for the maximum time), there are no assurances that this will happen. The date for mandatory liquidation and subsequent dissolution raise substantial doubt about Digital World’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Resources could be wasted in researching acquisitions that are not completed (including the proposed Business Combination), which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If Digital World has not completed its initial business combination within the required time period, its public stockholders may receive only approximately $10.20 per share, or less than such amount in certain circumstances, on the liquidation of its Trust Account and its warrants will expire worthless.

Digital World anticipates that the investigation of each specific target business and the negotiation, drafting and execution of relevant agreements, disclosure documents and other instruments will require substantial management time and attention and substantial costs for accountants, attorneys and others. If Digital World decides not to complete a specific initial business combination, such as the proposed Business Combination, the costs incurred up to that point for the proposed transaction likely would not be recoverable. Furthermore, if we reach an agreement relating to a specific target business, such as TMTG, Digital World may fail to complete its initial business combination for any number of reasons including those beyond its control. Any such event will result in a loss to Digital World of the related costs incurred which could materially adversely affect subsequent attempts to locate and acquire or merge with another business. If Digital World is unable to complete our initial business combination, its public stockholders may receive only approximately $10.20 per share on the liquidation of its Trust Account and its warrants will expire worthless.

Digital World’s ability to consummate an initial business combination may be adversely affected by economic uncertainty and volatility in the financial markets, including as a result of the military conflict in Ukraine.

In late February 2022, Russian military forces invaded Ukraine. Russia’s invasion, the responses of countries and political bodies to Russia’s actions, and the potential for wider conflict may increase financial market volatility and could have adverse effects on regional and global economic markets, including the markets for certain securities and commodities. Following Russia’s actions, various countries, including the United States, Canada, the United Kingdom, Germany, and France, as well as the European Union, issued broad-ranging

 

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economic sanctions against Russia. The sanctions consist of the prohibition of trading in certain Russian securities and engaging in certain private transactions, the prohibition of doing business with certain Russian corporate entities, large financial institutions, officials and persons, and the freezing of Russian assets. The sanctions include a possible commitment by certain countries and the European Union to remove selected Russian banks from the Society for Worldwide Interbank Financial Telecommunications, commonly called “SWIFT”, the electronic network that connects banks globally, and imposed restrictive measures to prevent the Russian Central Bank from undermining the impact of the sanctions. A number of large corporations and U.S. states have also announced plans to curtail business dealings with certain Russian businesses.

The imposition of the current sanctions (and potential imposition of further sanctions in response to continued Russian military activity) and other actions undertaken by countries and businesses may adversely impact various sectors of the Russian economy, and the military action has severe impacts on the Ukrainian economy, including its exports and food production. The duration of ongoing hostilities and corresponding sanctions and related events cannot be predicted and may result in a negative impact on the markets and thereby may negatively impact Digital World’s ability to consummate a business combination.

Risks Related to TMTG

Unless the context otherwise requires, references to “we”, “us” and “our” in this subsection “— Risks Related to TMTG” generally refer to TMTG in the present tense and the Combined Entity from and after the Business Combination.

Investing in us involves a high degree of risk. Before you invest in us, you should carefully consider the following risks, as well as general economic and business risks, and all of the other information contained in this proxy statement/prospectus. Any of the following risks could have a material adverse effect on our business, operating results and financial condition and cause the trading price of our common stock to decline, which would cause you to lose all or part of your investment. When determining whether to invest, you should also refer to the other information contained in this proxy statement/prospectus, including our financial statements and the related notes thereto, and the other financial information concerning us included elsewhere in this proxy statement/prospectus.

Risks Related to TMTG’s Business

TMTG has no operating history making it difficult to evaluate TMTG’s business and prospects and may increase the risks associated with your investment.

TMTG was formed on February 8, 2021 and started formulating its business plan at that time. TMTG did not begin developing the TruthSocial platform until June 2021. TMTG made TruthSocial available for general use in the first quarter of 2022. TMTG prides itself on its ability to build TruthSocial without the help of hostile technology companies. Working exclusively with alternative technology firms that share our commitment to free speech, TMTG fully launched TruthSocial for iOS on April 21, 2022, and expects to make the platform available on other desktop and mobile devices in the second quarter of 2022. TMTG cannot assure you that it will be able to operate its business successfully or implement its operating policies and strategies as described elsewhere in this proxy statement/prospectus. TMTG may encounter risks and challenges frequently experienced by growing companies in rapidly developing industries, including risks related to its ability to:

 

   

build a reputation for providing a superior platform and customer service, and for creating trust and long-term relationships with its potential customers;

 

   

implement a revenue model that will allow it to develop predictable revenues;

 

   

distinguish itself from competitors;

 

   

develop and offer a competitive platform that meets TMTG’s customers’ needs as they change;

 

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improve TMTG’s current operational infrastructure and non-platform technology to support its growth and to respond to the evolution of TMTG’s market and competitors’ developments;

 

   

develop, maintain and expand TMTG’s relationships with suppliers of quality advertising;

 

   

respond to evolving industry standards and government regulation that impact TMTG’s business;

 

   

prevent or mitigate failures or breaches of security; and

 

   

hire and retain qualified and motivated employees.

If TMTG is unable to do so, its business may suffer, its revenue and operating results may decline and TMTG may not be able to achieve further growth or sustain profitability.

Since inception, TMTG has continuously sought to develop its business model through the development of its technology as an early stage company. TMTG expects to incur operating losses for the foreseeable future.

TMTG to date has been involved primarily in organizational activities and technology development. TMTG has only recently made TruthSocial generally available and commenced other marketing trials of TMTG’s products and services. Further, TMTG has not yet fully developed its business plan or its management team, although TMTG has targeted and assembled certain intellectual property and real or intangible property rights. Accordingly, TMTG has no way to evaluate the likelihood that its business will be successful. Potential investors should be aware of the difficulties normally encountered by a new social media platform and the high rate of failure for such enterprises. The likelihood of success must be considered in light of the COVID-19 pandemic, problems, expenses, difficulties, complications and delays encountered in connection with the operations that TMTG plans to undertake. These potential problems include, but are not limited to, unanticipated problems relating to the development of TruthSocial, lack of market acceptance of TruthSocial or TMTG+ by users, and challenges relating to bringing potential vendors to participate in TMTG’s development and any additional costs and expenses that may exceed current estimates. TMTG expects to incur significant losses into the foreseeable future. TMTG recognizes that if the effectiveness of its business plan is not forthcoming it will not be able to continue business operations. There is no operating history upon which to base any assumption as to the likelihood that TMTG will prove successful and TMTG may never generate any operating revenues or ever achieve profitable operations. If TMTG is unsuccessful in addressing these risks, its business will most likely fail.

TMTG’s actual financial position and results of operations may differ materially from the expectations of TMTG’s management or the projections shown elsewhere in this proxy statement/prospectus.

TMTG’s actual financial position and results of operations may differ materially from management’s expectations and the projections shown elsewhere in this proxy statement/prospectus. As a result, TMTG’s revenue, net income and cash flow may differ materially from TMTG’s projected revenue, net income and cash flow. The process for estimating TMTG’s revenue, net income and cash flow requires the use of judgment in determining the appropriate assumptions and estimates. These estimates and assumptions may be revised as additional information becomes available and as additional analyses are performed. In addition, the assumptions used in planning may not prove to be accurate, and other factors may affect TMTG’s financial condition or results of operations.

The nominal purchase price paid by the Sponsor and directors and officers of Digital World for the Founder Shares may significantly dilute the implied value of the Public Shares in the event the parties complete an initial Business Combination. In addition, the value of the Founder Shares will be significantly greater than the amount the Sponsor and directors and officers of Digital World paid to purchase such shares in the event the parties complete an initial business Combination, even if the Business Combination causes the trading price of the New Digital World common stock to materially decline.

The nominal purchase price paid by the Sponsor and directors and officers of Digital World for the Founder Shares may significantly dilute the implied value of the Public Shares in the event we complete an initial

 

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business combination. In addition, the value of the Founder Shares will be significantly greater than the amount the Sponsor and directors and officers of Digital World paid to purchase such shares in the event we complete an initial Business Combination, even if the Business Combination causes the trading price of the New Digital World common stock to materially decline. The Sponsor and directors and officers of Digital World invested an aggregate of $11,359,840, comprised of the $25,000 purchase price for the Founder Shares and the $11,334,840 purchase price for the Placement Units. The amount held in our Trust Account was approximately $293.4 million as of December 31, 2022, implying a value of $10.20 per Public Share. Based on these assumptions, each share of New Digital World common stock would have an implied value of $             per share upon completion of our initial Business Combination, representing a             % decrease from the initial implied value of $             per Public Share. While the implied value of $             per share upon completion of our initial Business Combination would represent a dilution to our public stockholders, this would represent a significant increase in value for the Sponsor and directors and officers of Digital World relative to the price it paid for each Founder Share. At $0.005 per share, the 5,537,500 shares of New Digital World common stock that the Sponsor and directors and officers of Digital World holding Founder Shares would own upon completion of our initial Business Combination would have an aggregate implied value of $            . As a result, even if the trading price of the New Digital World common stock significantly declines, the value of the Founder Shares held by the Sponsor and directors and officers of Digital World will be significantly greater than the amount the Sponsor and directors and officers of Digital World paid to purchase such shares. In addition, the Sponsor and directors and officers of Digital World could potentially recoup their entire investment, inclusive of their investment in the Placement Units, even if the trading price of the New Digital World common stock after the initial Business Combination is as low as $             per share. As a result, the Sponsor and directors and officers of Digital World holding Founder Shares are likely to earn a substantial profit on their investment upon disposition of shares of New Digital World common stock even if the trading price of the New Digital World common stock declines after the completion of the initial Business Combination. The Sponsor and directors and officers of Digital World holding Founder Shares may therefore be economically incentivized to complete an initial business combination with a riskier, weaker-performing or less-established target business, or on terms less favorable to the public stockholders, rather than liquidating Digital World. This dilution would increase to the extent that public stockholders seek redemptions from the Trust Account for their Public Shares.

TMTG’s reputation, competitive advantage, financial position and relationships with its users could be materially harmed if TMTG is unable to comply with complex and evolving data protection and privacy laws and regulations, and the costs and resources required to achieve compliance may have a materially adverse impact.

TMTG’s reputation, competitive advantage, financial position and relationships with its users could be materially harmed if TMTG is unable to comply with complex and evolving data protection and privacy laws and regulations, and the costs and resources required to achieve compliance may have a materially adverse impact on its business. In the course of delivering TMTG’s product(s), TMTG expects to collect, transmit and store information which is related to and seeks to correlate internet-connected devices, user activity and the advertisements it places. Federal, state, and international laws and regulations govern the collection, use, processing, retention, sharing and security of data that TMTG may collect across TMTG’s advertising solutions. TMTG strives to comply with all applicable laws, regulations, policies and legal obligations relating to privacy and data collection, processing use and disclosure. However, the applicability of specific laws may be unclear in some cases and domestic and foreign government regulation and enforcement of data practices and data tracking technologies is expansive, not clearly defined and rapidly evolving. In addition, it is possible that these requirements may be interpreted and applied in a manner that is new or inconsistent from one jurisdiction to another and may conflict with other rules or TMTG’s practices. Any actual or perceived failure by us to comply with U.S. federal, state or international laws, including laws and regulations regulating privacy, data, security or consumer protection, or disclosure or unauthorized access by third parties to this information, could result in proceedings or actions against us by governmental entities, competitors, private parties or others. Any proceedings or actions against us alleging violations of consumer or data protection laws or asserting privacy-related theories could hurt TMTG’s reputation, force TMTG to spend significant amounts in defense of these

 

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proceedings, distract its management, increase its costs of doing business, adversely affect the demand for its solutions and ultimately result in the imposition of monetary liability. TMTG may also be contractually liable to indemnify and hold harmless TMTG’s customers from the costs or consequences of litigation resulting from using TMTG’s solutions or from the disclosure of confidential information, which could damage TMTG’s reputation among its current and potential customers, and may require significant expenditures of capital and other resources which could cause it to lose business and revenue.

The collection, protection and use of personal data are governed by privacy laws and regulations enacted in the United States and other jurisdictions around the world in which TMTG operates or plans to operate. These laws and regulations continue to evolve and may be inconsistent from one jurisdiction to another. Compliance with applicable privacy laws and regulations may increase TMTG’s costs of doing business and adversely impact its ability to conduct its business and market its solutions, products and services to its members and potential members.

For example, TMTG is subject to the European Union’s General Data Protection Regulation (EU) 2016/679 (“GDPR”), which applies to all members of the European Economic Area (“EEA”) and, in some circumstances, to processors in a state outside the EEA including any business, regardless of its location, that provides goods or services to individuals located in the EEA. The GDPR imposes significant obligations on data controllers and data processors, requiring the implementation of more stringent requirements for the processing of personal data. If TMTG fails to comply with the GDPR, it may lead to regulatory investigation with possible enforcement of monetary penalties ranging from 10 million to 20 million euro, or 2% to 4% of annual worldwide revenue (whichever is higher), private or class action lawsuits and/or reputational damage.

Further, withdrawal of the United Kingdom (“UK”) from the European Union (“EU”) could lead to legal uncertainty and potentially divergent national laws and regulations. In particular, while the Data Protection Act of 2018, which supplements the GDPR, is now effective in the UK alongside the UK GDPR, it is still unclear whether transfer of data from the EEA to the UK will remain lawful under the GDPR without additional safeguards.

EU laws regulate transfers of EEA personal data to third countries, such as the United States, that have not been found to provide adequate protection to such personal data. Recent legal developments in the EU have created complexity and uncertainty regarding transfers of personal data from the EEA and the UK to the United States and other jurisdictions. For example, on July 16, 2020, the European Court of Justice (“CJEU”) invalidated the EU-U.S. Privacy Shield framework (“Privacy Shield”), which provided companies with a mechanism to comply with data protection requirements when transferring personal data from the EEA/UK to the United States. The same decision also cast doubt on the ability to use one of the primary alternatives to the EU-U.S. Privacy Shield framework, namely, the European Commission’s Standard Contractual Clauses (“SCCs”), to lawfully transfer personal data from Europe to the United States and most other countries (though the SCCs currently remain a valid data transfer mechanism under the GDPR and UK GDPR). At present, there are few if any viable alternatives to the Privacy Shield Frameworks and the SCCs for the foregoing purposes, which may lead to governmental enforcement actions, litigation, fines and penalties or adverse publicity which could have an adverse effect on our reputation and business.

In Canada, TMTG is subject to Canada’s Personal Information and Protection of Electronic Documents Act (“PIPEDA”). PIPEDA provides Canadian residents with privacy protections and sets out rules for how companies may collect, use and disclose personal information in the course of commercial activities. The costs of compliance with, and other burdens imposed by, these and other international data privacy and security laws may limit the use and adoption of TMTG’s solutions, products and services and could have a materially adverse impact on its business. Any failure or perceived failure by TMTG or third-party service providers to comply with international data privacy and security laws may lead to regulatory enforcement actions, fines, private lawsuits or reputational damage.

 

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Additionally, in June 2018, California passed the California Consumer Privacy Act (“CCPA”), which provides new data privacy rights for consumers and new operational requirements for companies. The CCPA gives California residents new rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is collected, used, and shared. The CCPA provides for civil penalties for violations, and creates a private right of action for security breaches that could lead to consumer class actions and other litigation against the Company. If TMTG fails to comply with the CCPA or other federal or state data protection and data privacy laws, or if regulators or plaintiffs assert the Company has failed to comply with them, it may lead to regulatory enforcement actions, private lawsuits and/or reputational damage. Additionally, a new California ballot initiative, the California Privacy Rights Act, or the CPRA, passed in California in November 2020. The CPRA will impose additional data protection obligations on companies doing business in California, including additional consumer rights processes and opt outs for certain uses of sensitive data. The majority of the provisions will go into effect on January 1, 2023, and additional compliance investment and changes to business processes may be required.

The FTC has also adopted revisions to the Children’s Online Privacy Protection Act (“COPPA”) that expands liability for the collection of information by operators of websites and other electronic solutions that are directed to children. Questions exist as to how regulators and courts may interpret the scope and circumstances for potential liability under COPPA, and the FTC continues to provide guidance and clarification as to its 2013 revisions of COPPA. FTC guidance or enforcement precedent may make it difficult or impractical for TMTG to provide advertising on certain websites, services or applications. In addition, the FTC recently fined an ad network for certain methods of collecting and using data from mobile applications, including certain applications directed at children, and failing to disclose the data collection to mobile application developers in its network.

Evolving definitions of personal data within the EU, especially relating to the classification of IP addresses, machine or device identifiers, geo-location data and other such information, may cause TMTG to change its business practices, diminish the quality of its data and the value of its solution, and hamper its ability to expand its offerings. TMTG’s failure to comply with evolving interpretations of applicable laws and regulations, or to adequately protect personal data, could result in enforcement action against us or reputational harm, which could have a material adverse impact on TMTG’s business, financial condition and results of operations.

In addition to compliance with government regulations, TMTG expects to participate in trade associations and industry self-regulatory groups that promulgate best practices or codes of conduct addressing the provision of internet advertising. TMTG could be adversely affected by changes to these guidelines and codes in ways that are inconsistent with its practices or in conflict with the laws and regulations of U.S. or international regulatory authorities. For instance, new guidelines, codes or interpretations, by self-regulatory organizations or government agencies, may require additional disclosures or additional consumer consents, such as “opt-in” permissions to share, link or use data, such as health data from third parties, in certain ways. If TMTG fails to abide by, or are perceived as not operating in accordance with, industry best practices or any industry guidelines or codes with regard to privacy, its reputation may suffer and TMTG could lose relationships with advertisers and digital media properties.

Economic downturns and market conditions beyond TMTG’s control could adversely affect its business, financial condition and operating results. The COVID-19 pandemic has had, and is expected to continue to have, an adverse impact on our business, including our financial results and prospects.

TMTG’s business depends on the overall demand for advertising and on the economic health of advertisers that benefit from TruthSocial. Economic downturns or unstable market conditions, such as those potentially created by the outbreak of COVID-19 discussed herein, may cause advertisers to decrease their advertising budgets, which could reduce spend with TruthSocial and adversely affect TMTG’s business, financial condition and operating results. Our business, operations and financial performance have been, and may in the future be, negatively impacted by the COVID-19 pandemic and related public health responses, such as travel bans, restrictions, social distancing requirements and shelter-in-place orders. The pandemic and these related responses

 

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have caused, and may in the future cause, decreased advertiser demand for our platform, global slowdown of economic activity, disruptions of major events, volatility and disruption of financial markets, and changes in consumer behavior. For example, to the extent the pandemic continues to disrupt economic activity globally, it could adversely affect our business, financial condition and operating results through prolonged decreases in advertising spend, credit deterioration of our customers, depressed economic activity, or declines in capital markets. While the economy is reopening in various parts of the world, some countries and locations are reinstating lockdowns and other restrictions that make a full recovery difficult to predict. We continue to monitor the evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and there may be developments outside our control requiring us to adjust our operating plan.

The loss of key personnel or the inability of replacements to quickly and successfully perform in their new roles could adversely affect TMTG’s business.

TMTG depends on the leadership and experience of its relatively small number of key executive management personnel. The pursuit of the merger and the preparation for the integration has placed a burden on TMTG’s management and internal resources. TMTG has experienced management departures, and may continue to experience management departures. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on TMTG’s business, financial condition and results of operations. The loss of the services of these key employees or TMTG’s executive management members could have a material adverse effect on TMTG’s business and prospects, as TMTG may not be able to find suitable individuals to replace such personnel on a timely basis or without incurring increased costs. Furthermore, if TMTG loses or terminates the services of one or more of its key employees or if one or more of TMTG’s current or former executives or key employees joins a competitor or otherwise competes with us, it could impair TMTG’s business and its ability to successfully implement TMTG’s business plan. Additionally, if TMTG is unable to hire qualified replacements for its executive and other key positions in a timely fashion, its ability to execute its business plan would be harmed. Even if TMTG can quickly hire qualified replacements, TMTG could experience operational disruptions and inefficiencies during any such transition. TMTG believes that its future success will depend on its continued ability to attract and retain highly skilled and qualified personnel.

In addition, many of TMTG’s key technologies and systems will be custom-made for TMTG’s business by TMTG’s personnel. The loss of key engineering, product development, marketing and sales personnel could disrupt TMTG’s operations and have an adverse effect on TMTG’s business.

As TMTG continues to grow, TMTG cannot guarantee TMTG will continue to attract the personnel TMTG needs to maintain TMTG’s competitive position. In particular, TMTG intends to hire a significant number of technically-skilled personnel in 2022, and TMTG expects to face significant competition from other companies in hiring such personnel. As TMTG matures, the incentives to attract, retain and motivate employees provided by TMTG’s equity awards or by future arrangements, such as through cash bonuses, may not be effective. TMTG has a number of current employees who upon the completion of the Business Combination, and thereafter, will be entitled to receive substantial amounts of TMTG capital stock. As a result, it may be difficult for TMTG to continue to retain and motivate these employees, and the vesting of equity incentives could affect their decisions about whether or not they continue to work for TMTG. If TMTG does not succeed in attracting, hiring and integrating excellent personnel, or retaining and motivating existing personnel, TMTG may be unable to grow effectively

 

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If TruthSocial or the TMTG+ streaming service fail to develop and maintain followers or a sufficient audience, if adverse trends develop in the social media platforms and streaming services business generally, or if President Trump were to cease to be able to devote substantial time to TruthSocial or TMTG+ streaming service, TMTG’s business would be adversely affected.

Social media platform and streaming services are speculative businesses because revenues and income derived from them depend primarily upon the continued acceptance of that platform and streaming services by the public. Public acceptance of a particular platform or programming depends upon, among other things, the ease of use of the platform, the quality of that programming, promotion of that programming, the quality and acceptance of competing platforms, streaming services and television programming and other sources of entertainment and information. A ratings decline could make it economically inefficient to continue providing for the use of the platform or the production of the streaming services program. If President Trump fails to attract and retain the public’s interest or the services provided by TruthSocial and TMTG+, or if the customer base were to cease using TruthSocial or subscribing to TMTG+, it could result in a write-down of TMTG’s capitalized development costs. The amount of any write-down would vary depending on a number of factors, including when the product or service ceased and the extent to which TMTG continued to generate revenues from the use of TMTG’s existing program library.

Adverse trends in the social media platform and streaming services of production business generally could harm TMTG’s revenues.

Social media platform and streaming services revenues and income may also be negatively affected by a number of other factors, most of which are not within TMTG’s control. These factors include a general decline in viewers, pricing pressure in the advertising industry, participants in TruthSocial, general economic conditions, increases in production costs, availability of other forms of entertainment and leisure time activities and other factors. All of these factors may quickly change, and these changes cannot be predicted with certainty. TMTG’s future licensing fees may also be adversely affected by these changes. Accordingly, if any of these changes were to occur, the revenues and income TMTG generates from its products and services could decline.

TMTG has placed emphasis on building a platform for all Americans to freely express themselves through TruthSocial. In particular, President Trump has stated that this is a platform for all who have been censored by Big Tech. Failure to realize this vision would adversely affect TMTG’s brand and business prospects.

TruthSocial is being developed as a global platform for public self-expression and conversation in real time, and the market for TruthSocial is relatively new and may not develop as expected, if at all. People who are not TruthSocial users may not understand the value of TruthSocial and new users may initially find TruthSocial confusing. There may be a perception that TruthSocial is only useful to users who share Truths, or to influential users with large audiences. Convincing potential new users, especially users who oppose Big Tech censorship, of the value of TruthSocial is critical to increasing TMTG’s user base and to the success of TMTG’s business. In addition, there are a number of other social media platforms that focus on the same audience that TruthSocial will focus on. To the extent users prefer a platform that is not associated with President Trump, our ability to attract users may decrease. Failure to attract a sufficient user base would adversely affect TMTG’s business prospects.

TMTG has placed emphasis on providing streaming services wherein the programming would be “non-woke” and will cancel “cancel culture.” Particularly, President Trump has stated that TMTG will stand up to “cancel culture” and the “self-righteous scolds.” Failure to realize this vision would adversely affect TMTG’s brand and business prospects.

Maintaining and enhancing TruthSocial and TMTG+ may require TMTG to make substantial investments to develop and provide “non-woke” content which cancels “cancel culture” and these investments may not achieve the desired goals. If TMTG fails to successfully promote and maintain TMTG’s programming as one which is “non-woke” and one which cancels “cancel culture” or if TMTG incurs excessive expenses in this effort, its business and operating results could be adversely affected.

 

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If TMTG’s users do not continue to contribute content or their contributions are not valuable to other users, TMTG may experience a decline in the number of users accessing its products and services and user engagement, which could result in the loss of advertisers and revenue.

TMTG’s success depends on its ability to provide users with products and services with valuable content, which in turn for TruthSocial depends on the content contributed by TMTG’s users. TMTG believes that one of TruthSocial’s competitive advantages will be the quality, quantity and real-time nature of the content on TruthSocial, and that access to unique or real-time content is one of the main reasons users may visit TruthSocial. TMTG seeks to foster a broad and engaged user community, and TMTG intends to encourage high-profile individuals and entities to use TMTG’s products and services to freely express their views to broad audiences without the fear of being censored or cancelled for any unpopular or non-woke opinions. TMTG may also encourage media outlets to use its products and services to distribute their content. If users, including influential users, do not contribute content to TruthSocial, and it is unable to provide users with valuable and timely content, TMTG’s user base and user engagement may decline. Additionally, if TMTG is not able to address user concerns regarding the safety and security of TruthSocial or if TMTG is unable to successfully prevent abusive or other hostile behavior on TruthSocial, the size of the TruthSocial user base and user engagement may decline. TMTG may rely on the sale of advertising services for the substantial majority of TMTG’s revenue. If TMTG experiences a decline in the number of users or a decline in user engagement, including as a result of the loss of high-profile individuals and entities who generate content on TruthSocial, advertisers may not view TruthSocial as attractive for their marketing expenditures, and may reduce their spending with us—which would harm TMTG’s business and operating results.

If TMTG+’s efforts to attract and retain subscribers and users are not successful, TMTG’s revenues will be affected adversely.

TMTG must attract and retain subscribers and users for TMTG+. To succeed, TMTG+ must attract a large number of subscribers who have traditionally used pay cable channels, such as HBO and Showtime, and pay-per-view and VOD, or competing streaming services such as Hulu, Disney+, Amazon Prime, Netflix, for in-home filmed entertainment. TMTG’s ability to attract and retain subscribers will depend in part on TMTG+’s ability to consistently provide its subscribers a high-quality experience for selecting and viewing titles, including providing accurate recommendations. If consumers do not perceive TMTG+ programming to be of high quality, or if TMTG+ introduces new services that are not favorably received by consumers, TMTG+ may not be able to attract or retain subscribers. If TMTG’s efforts to attract and retain subscribers are not successful, its revenue will be affected adversely.

TMTG’s focus on product innovation and user engagement rather than short-term operating results may adversely affect TMTG’s revenues.

TMTG intends to quickly develop and launch new and innovative features. TMTG intends to focus on improving the user experience for TruthSocial and on developing new and improved products and services for the advertisers on TruthSocial. TMTG intends to prioritize innovation and the experience for users and advertisers on TruthSocial over short-term operating results. TMTG may frequently make product and service decisions that may reduce TMTG’s short-term operating results if it believes that the decisions are consistent with its goals to improve the user experience and performance for advertisers, which it believes will improve its operating results over the long term. These intended decisions may not be consistent with the short-term expectations of investors and may not produce the long-term benefits that TMTG expects, in which case TruthSocial user growth and user engagement, its relationships with advertisers and its business and operating results could be harmed. In addition, TMTG’s intent to focus on the user experience may negatively impact TMTG’s relationships with prospective advertisers. This could result in a loss of advertisers, which could harm TMTG’s revenue and operating results.

 

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TruthSocial and TMTG+ user growth and engagement on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that TMTG does not control.

TMTG intends to make its products and services available across a variety of operating systems and through websites. TMTG will be dependent on the interoperability of TruthSocial and TMTG+ with popular devices, desktop and mobile operating systems and web browsers that TMTG does not control, such as Mac OS, Windows, Android, iOS, Chrome and Firefox. Any changes in such systems, devices or web browsers that degrade the functionality of TMTG’s products and services or give preferential treatment to competitive products or services could adversely affect usage of TMTG’s products and services. Further, if the number of platforms for which TMTG develops its product expands, it will result in an increase in TMTG’s operating expenses. In order to deliver high-quality products and services, it is important that TMTG’s products and services work well with a range of operating systems, networks, devices, web browsers and standards that TMTG does not control. In addition, because a majority of TMTG’s future users may access TMTG’s products and services through mobile devices, TMTG is particularly dependent on the interoperability of its products and services with mobile devices and operating systems. TMTG may not be successful in developing relationships with key participants in the mobile industry or in developing products or services that operate effectively with these operating systems, networks, devices, web browsers and standards. In the event that it is difficult for TMTG’s users to access and use TMTG’s products and services, particularly on their mobile devices, TMTG’s user growth and engagement could be harmed, and its business and operating results could be adversely affected.

TMTG may not be successful in its efforts to grow and monetize the TruthSocial platform and TMTG+ streaming services.

Prospective developers may not be successful in building apps or websites that create and maintain user engagement. Additionally, potential developers may choose to build on other platforms, including mobile platforms controlled by third parties, rather than building on the TruthSocial platform or providing content for TMTG+ services. TMTG intends to balance the distribution objectives of TMTG’s developers with TMTG’s desire to provide an optimal user experience, and TMTG may not be successful in achieving a balance that attracts and retains TMTG’s product developers. If TMTG is not successful in its efforts to grow TMTG’s products or if TMTG is unable to build and maintain good relations with platform and streaming services developers, TMTG’s user growth and user engagement and TMTG’s financial results may be adversely affected.

TMTG’s estimates of market opportunity and forecasts of market growth may prove to be inaccurate.

Market opportunity estimates and growth forecasts, whether obtained from third-party sources or developed internally, are subject to significant uncertainty and are based on assumptions and estimates that may prove to be inaccurate. This is especially so at the present time due to the uncertain and rapidly changing projections of the severity, magnitude and duration of the COVID-19 pandemic. The estimates and forecasts included in this proxy statement/prospectus relating to the size and expected growth of the target market and market demand may also prove to be inaccurate. The estimated addressable market may not materialize in the timeframe of the projections included herein, if ever, and even if the markets meet the size estimates and growth estimates presented in this proxy statement/prospectus, our business could fail to grow at similar rates.

TMTG’s business depends on continued and unimpeded access to TruthSocial and TMTG+ on the Internet by TMTG’s users and advertisers. If TMTG or TMTG’s users experience disruptions in Internet service or if Internet service providers are able to block, degrade or charge for access to TMTG’s products and services, TMTG could incur additional expenses and the loss of users and advertisers.

TMTG depends on the ability of TMTG’s users and advertisers to access the Internet. This access will be provided by companies—including hostile legacy technology companies—that have significant market power in the broadband and Internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies, government-owned service providers, device manufacturers and operating

 

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system providers, any of whom could take actions that degrade, disrupt or increase the cost of user access to TMTG’s products or services, which would, in turn, negatively impact TMTG’s business. The adoption of any laws or regulations that adversely affect the growth, popularity or use of the Internet, including laws or practices limiting Internet neutrality, could decrease the demand for, or the usage of, TMTG’s products and services, increase TMTG’s cost of doing business and adversely affect TMTG’s operating results. TMTG will also rely on other companies to maintain reliable network systems that provide adequate speed, data capacity and security to us and TMTG’s users. As the Internet continues to experience growth in the number of users, frequency of use and amount of data transmitted, the Internet infrastructure that TMTG and its users rely on may be unable to support the demands placed upon it. The failure of the Internet infrastructure that TMTG or TMTG’s users rely on, even for a short period of time, could undermine TMTG’s operations and harm TMTG’s operating results.

If TMTG fails to expand effectively in international markets, TMTG’s revenue and TMTG’s business will be harmed.

TMTG may not be able to monetize TMTG’s products and services internationally as a result of competition, advertiser demand, differences in the digital advertising market and digital advertising conventions, as well as differences in the way that users in different countries access or utilize TMTG’s products and services. Differences in the competitive landscape in international markets may impact TMTG’s ability to monetize TMTG’s products and services.

TMTG’s operating results in TMTG+ are expected to be difficult to predict based on a number of factors that also will affect TMTG’s long-term performance.

TMTG expects its operating results in TMTG+ to fluctuate significantly in the future based on a variety of factors, many of which are outside TMTG’s control and difficult to predict. As a result, period-to-period comparisons of TMTG’s future operating results may not be a good indicator of TMTG’s future or long-term performance. The following factors may affect TMTG+ from period to period and may affect TMTG’s long-term performance:

 

   

TMTG’s ability to manage consumer expectations and secure effective technological support to handle significant increases in the number of subscribers and subscriber selections;

 

   

TMTG’s ability to improve or maintain gross margins in its business;

 

   

changes by TMTG’s competitors to their product and service offerings;

 

   

price competition;

 

   

TMTG’s ability to maintain an adequate breadth and depth of titles for TMTG+;

 

   

changes in promotional support offered by studios;

 

   

TMTG’s ability to maintain, upgrade and develop its website, its internal computer systems and any fulfillment processes;

 

   

fluctuations in consumer spending on streaming services related products;

 

   

fluctuations in the use of the Internet for the purchase of consumer goods and services such as those offered by TMTG+;

 

   

technical difficulties, system downtime or Internet disruptions;

 

   

TMTG’s ability to attract new and qualified personnel in a timely and effective manner and retain existing personnel;

 

   

the amount and timing of operating costs and capital expenditures relating to expansion of TMTG’s business, operations and infrastructure;

 

   

TMTG’s ability to effectively manage the development of new business segments and markets;

 

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TMTG’s ability to maintain and develop new and existing marketing relationships;

 

   

TMTG’s ability to successfully manage the integration of operations and technology resulting from acquisitions;

 

   

governmental regulation and taxation policies; and

 

   

general economic conditions and economic conditions specific to the Internet, online commerce, and the movie industry.

TMTG’s business is highly competitive. Competition presents an ongoing threat to the success of TMTG’s business. If TMTG is unable to compete effectively for users and advertiser spend, TMTG’s business and operating results could be harmed.

Competition for users of TMTG’s products and services will be intense. Although TMTG intends to develop a new global platform for public self-expression and conversation in real time, TMTG will face strong competition in its business. TMTG will compete against many companies to attract and engage users, including companies which have greater financial resources and substantially larger user bases, such as Twitter, Meta/Facebook (including Instagram), Alphabet/Google, Netflix, Disney+, Hulu, Microsoft (including LinkedIn), and Yahoo!, which offer a variety of Internet and mobile device-based products, services and content. For example, Facebook and Twitter operate a social networking site with significantly more users than TruthSocial may have in the future. Additionally, as a private company under new ownership, Twitter may demonstrate a renewed commitment to free speech principles that will heighten competition for users who prioritize such principles.

TMTG believes that its ability to compete effectively for users depends upon many factors both within and beyond TMTG’s control, including:

 

   

the popularity, usefulness, ease of use, performance and reliability of TMTG’s products and services compared to those of TMTG’s competitors;

 

   

the amount, quality and timeliness of content generated by TMTG’s users;

 

   

the timing and market acceptance of TMTG’s products and services;

 

   

the adoption of TMTG’s products and services internationally;

 

   

TMTG’s ability, and the ability of TMTG’s competitors, to develop new products and services and enhancements to existing products and services;

 

   

the frequency and relative prominence of the ads displayed by TMTG or TMTG’s competitors;

 

   

TMTG’s ability to establish and maintain relationships with platform partners that integrate with TruthSocial;

 

   

changes mandated by, or that TMTG elects to make to address, legislation, regulatory authorities or litigation, including settlements and consent decrees, some of which may have a disproportionate effect on TMTG;

 

   

the application of antitrust laws both in the United States and internationally;

 

   

government action regulating competition;

 

   

TMTG’s ability to attract, retain and motivate talented employees, particularly engineers, designers and product managers;

 

   

acquisitions or consolidation within TMTG’s industry, which may result in more formidable competitors; and

 

   

TMTG’s reputation and the brand strength relative to its competitors.

 

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TMTG will face significant competition for advertiser spend. TMTG’s revenue will initially be generated through ads on TruthSocial, and TMTG will compete against online and mobile businesses, including those referenced above, and traditional media outlets, such as television, radio and print, for advertising budgets. In order to grow TMTG’s revenue and improve TMTG’s operating results, TMTG may increase TMTG’s share of spending on advertising relative to TMTG’s competitors, many of which are larger companies that offer more traditional and widely accepted advertising products. In addition, some of TMTG’s larger competitors have substantially broader product or service offerings and user bases and leverage their relationships based on other products or services to gain additional share of advertising budgets.

TMTG believes that its ability to compete effectively for advertiser spend depends upon many factors both within and beyond TMTG’s control, including:

 

   

the size and composition of TMTG’s user base relative to those of TMTG’s competitors;

 

   

TMTG’s ad targeting capabilities, and those of TMTG’s competitors;

 

   

the timing and market acceptance of TMTG’s advertising services, and those of TMTG’s competitors;

 

   

TMTG’s marketing and selling efforts, and those of TMTG’s competitors;

 

   

the pricing for TMTG’s products relative to the advertising products and services of TMTG’s competitors;

 

   

the return TMTG’s advertisers receive from TMTG’s advertising services, and those of TMTG’s competitors;

 

   

TMTG’s reputation and the strength of TMTG’s brand relative to TMTG’s competitors;

 

   

the engagement of TMTG’s users with TMTG’s products;

 

   

TMTG’s ability to monetize TruthSocial, including TMTG’s ability to successfully monetize mobile usage;

 

   

TMTG’s customer service and support efforts;

 

   

TMTG’s ability to establish and maintain developers’ interest in building TruthSocial and providing content for TMTG+;

 

   

acquisitions or consolidations within TMTG’s industry, which may result in more formidable competitors; and

 

   

TMTG’s ability to cost-effectively manage and grow its operations.

In recent years, there have been significant acquisitions and consolidation by and among TMTG’s potential competitors. TMTG anticipates this trend of consolidation will continue, which will present heightened competitive challenges for TMTG’s business. Acquisitions by TMTG’s competitors may result in reduced functionality of TruthSocial or availability of content for TMTG+. Any elimination of integration with TruthSocial in the future may adversely impact TMTG’s business and operating results.

Consolidation may also enable TMTG’s larger competitors to offer bundled or integrated products that feature alternatives to TruthSocial. Reduced functionality of TruthSocial, or TMTG’s competitors’ ability to offer bundled or integrated products that compete directly with TMTG, may cause TMTG’s user growth, user engagement and ad engagement to decline and advertisers to reduce their spend with TMTG. If TMTG is not able to compete effectively for users and advertiser spend its business and operating results would be materially and adversely affected.

Many of TMTG’s potential competitors have significantly greater resources and better competitive positions in certain markets than TMTG does. These factors may allow TMTG’s competitors to respond more effectively to new or emerging technologies and changes in market requirements. TMTG’s competitors may develop

 

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products, features, or services that are similar to TMTG’s or that achieve greater market acceptance, may undertake more far-reaching and successful product development efforts or marketing campaigns, or may adopt more aggressive pricing policies. In addition, platform partners may use information shared by TMTG’s users through TruthSocial in order to develop products or features that compete with TMTG. If TMTG is not able to effectively compete, TMTG’s user base and level of user engagement may decrease, which could make TMTG less attractive to developers and advertisers and materially and adversely affect TMTG’s revenue and results of operations.

TruthSocial exists to provide its users a true free speech platform and avoid cancellation by Big Tech. There is nothing preventing Big Tech from ceasing to cancel different voices. If that were to happen, the number of users on TMTG’s platform may decrease.

Additionally, the market for in-home filmed entertainment is intensely competitive and subject to rapid change. Many consumers maintain simultaneous relationships with multiple in-home filmed entertainment providers and can easily shift spending from one provider to another. For example, consumers may subscribe to HBO, Netflix, Hulu, Disney+, Amazon Prime, or some combination thereof, all in the same month. Competitors may be able to launch new businesses at relatively low cost. Many of the TMTG’s competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing, and other resources than TMTG does. Some of TMTG’s competitors have adopted, and may continue to adopt, aggressive pricing policies and devote substantially more resources to marketing and website and systems development than TMTG does. This could affect adversely TMTG’s ability to provide filmed entertainment on favorable terms, ultimately harming TMTG’s business.

Action by governments to censor content on or restrict access to TruthSocial and TMTG+ in their countries could substantially harm TMTG’s business and financial results.

It is possible that governments of one or more countries may seek to censor content available on TruthSocial and TMTG+ in their country or impose other restrictions that may affect the accessibility of TruthSocial and TMTG+ in their country for an extended period of time or indefinitely. In addition, governments in other countries may seek to restrict access to TruthSocial and TMTG+ from their country entirely if they consider TMTG to be in violation of their laws. In the event that access to TruthSocial or TMTG+ is restricted, in whole or in part, in one or more countries or TMTG’s competitors are able to successfully penetrate geographic markets that TMTG cannot access, TMTG’s ability to retain or increase TMTG’s user base and user engagement may be adversely affected, TMTG may not be able to maintain or grow TMTG’s revenue as anticipated, and TMTG’s financial results could be adversely affected.

TMTG’s new products, services and initiatives and changes to existing products, services and initiatives could fail to attract sufficient users and advertisers or generate revenue.

TMTG’s ability to increase the size and engagement of TruthSocial’s user base, attract advertisers and generate revenue will depend in part on TMTG’s ability to create successful new products and services, both independently and in conjunction with third parties. TMTG may introduce significant changes to TMTG’s existing products and services or develop and introduce new and unproven products and services, including technologies with which TMTG has little or no prior development or operating experience. If new or enhanced products or services fail to engage users and advertisers, TMTG may fail to attract or retain users or to generate sufficient revenue or operating profit to justify TMTG’s investments, and TMTG’s business and operating results could be adversely affected. In the future, TMTG may invest in new products, services, and initiatives to generate revenue, but there is no guarantee these approaches will be successful. If TMTG’s strategic initiatives do not enhance TMTG’s ability to monetize TMTG’s products and services or enable it to develop new approaches to monetization, TMTG may not be able to maintain or grow TMTG’s revenue or recover any associated development costs and TMTG’s operating results could be adversely affected.

 

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If TMTG’s efforts to build and maintain strong brand identity, improve user base for TruthSocial, and subscriber satisfaction for TMTG’s streaming services are not successful, TMTG may not be able to attract or retain users or subscribers, and TMTG’s operating results will be affected adversely. If events occur that damage TMTG’s reputation and brand, TMTG’s ability to expand TMTG’s base of users, developers and advertisers may be impaired, and TMTG’s business and financial results may be harmed.

TMTG believes that the Trump brand will significantly contribute to the success of TMTG’s business. TMTG also believes that maintaining and enhancing TMTG’s brand is critical to expanding its base of users, developers and advertisers. Maintaining and enhancing TMTG’s brand will depend largely on TMTG’s ability to continue to provide useful, reliable, trustworthy and innovative products, which TMTG may not do successfully. TMTG may introduce new products or terms of service that users do not like, which may negatively affect TMTG’s brand. Additionally, the actions of TMTG’s platform developers may affect TMTG’s brand if users do not have a positive experience using third-party apps and websites integrated with TruthSocial. TMTG’s brand may also be negatively affected by the actions of users that are hostile towards President Trump or towards other people, by users impersonating other people, by users identified as spam, by users introducing excessive amounts of spam on TMTG’s platform or by third parties obtaining control over users’ accounts. TMTG expects that in the future TMTG may experience media, legislative, or regulatory scrutiny of TMTG’s decisions regarding user privacy or other issues, which may adversely affect TMTG’s reputation and brand. TMTG also may fail to provide adequate customer service, which could erode confidence in TMTG’s platform. Maintaining and enhancing TMTG’s platform may require it to make substantial investments and these investments may not be successful. If TMTG fails to successfully promote and maintain its platform or if it incurs excessive expenses in this effort, TMTG’s business and financial results may be adversely affected.

If TMTG is unable to offset increased demand for titles with increased subscriber retention or operating margins, TMTG’s operating results may be affected adversely.

If TMTG+ does not attract and retain subscribers or TMTG does not achieve operating margins to an extent necessary to offset operating costs, TMTG’s operating results will be adversely affected. In addition, subscriber demand for titles may increase for a variety of other reasons beyond TMTG’s control, including promotion by studios and seasonal variations in movie watching. TMTG’s subscriber growth and retention may be affected adversely if TMTG attempts to increase TMTG+ monthly subscription fees to offset any increased costs of acquiring or delivering titles.

Following the Business Combination, TMTG may need additional capital, and TMTG cannot be sure that additional financing will be available.

Although TMTG currently anticipates that the proceeds from the Business Combination and the PIPE Investment, together with TMTG’s available funds and cash flow from operations, will be sufficient to meet TMTG’s cash needs for the foreseeable future, TMTG may require additional financing. TMTG’s ability to obtain financing will depend, among other things, on TMTG’s development efforts, business plans, operating performance and condition of the capital markets at the time TMTG seeks financing. TMTG cannot assure you that additional financing will be available to it on favorable terms when required, or at all. If TMTG raises additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of New Digital World common stock, and the existing stockholders may experience dilution.

Any significant disruption in service on TruthSocial or in TMTG’s information systems could result in a loss of users or subscribers.

Potential users and subscribers will access TMTG+ through TMTG’s website and related mobile applications, where the title selection process may be integrated with TMTG’s delivery processing systems and software. TMTG’s reputation and ability to attract, retain and serve TMTG’s subscribers is dependent upon the reliable performance of TMTG’s website and related apps, network infrastructure and fulfillment processes.

 

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Interruptions in these systems could make TMTG’s website unavailable and hinder TMTG’s ability to fulfill selections. Some of TMTG’s software is proprietary, and TMTG may rely on the expertise of members of TMTG’s engineering and software development teams for the continued performance of TMTG’s software and computer systems. Service interruptions or the unavailability of TMTG’s website could diminish the overall attractiveness of TMTG’s subscription service to existing and potential subscribers.

TMTG’s servers may be vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, which could lead to interruptions and delays in TMTG’s service and operations and loss, misuse or theft of data. TMTG’s website may periodically experience directed attacks intended to cause a disruption in service. Any attempts by hackers to disrupt TMTG’s website service or TMTG’s internal systems, if successful, could harm TMTG’s business, be expensive to remedy and damage TMTG’s reputation. Efforts to prevent hackers from entering TMTG’s computer systems may be expensive to implement and may limit the functionality of TMTG’s services. Any significant disruption to TMTG’s website or internal computer systems could result in a loss of subscribers and adversely affect TMTG’s business and results of operations.

TMTG’s communications hardware and the computer hardware used to operate TMTG’s website will initially be hosted at the facilities of a third-party provider. Hardware for TMTG’s delivery systems is intended to be maintained in TMTG’s distribution centers. Fires, floods, earthquakes, power losses, telecommunications failures, break-ins, and similar events could damage these systems and hardware or cause them to fail completely. Problems faced by TMTG’s third-party web hosting provider, with the telecommunications network providers with whom it contracts or with the systems by which it allocates capacity among its subscribers, including us, could impact adversely the experience of TMTG’s subscribers. Any of these problems could result in a loss of subscribers.

Privacy concerns could limit TMTG’s ability to leverage TruthSocial and TMTG+ user and subscriber data.

In the ordinary case of business, and in particular, in connection with providing TMTG+ users, TMTG may collect and utilize data supplied by TMTG+ subscribers. TMTG may face certain legal obligations regarding the manner in which TMTG treats such information. Other businesses have been criticized by privacy groups and governmental bodies for attempts to link personal identities and other information to data collected on the Internet regarding users’ browsing and other habits. Increased regulation of data utilization practices, including self-regulation, as well as increased enforcement of existing laws, could have an adverse effect on TMTG’s business.

TMTG’s reputation and relationships with subscribers and credit card companies would be harmed if TMTG’s billing data were to be accessed by unauthorized persons or TMTG’s billing software fails.

To secure transmission of confidential information obtained by TMTG for billing purposes, including TMTG+ subscribers’ credit card data, TMTG intends to rely on licensed encryption and authentication technology. In conjunction with the credit card companies, TMTG intends to take measures to protect against unauthorized intrusion into TMTG+’s subscribers’ credit card and other data. If, despite these measures, TMTG experiences any unauthorized intrusion into TMTG+’s subscribers’ data, potential subscribers may become unwilling to provide the information to us necessary for them to become subscribers, and TMTG’s business could be affected adversely. Similarly, if a well-publicized breach of the consumer data security of any other major consumer website were to occur, there could be a general public loss of confidence in the use of the Internet for commerce transactions, which could adversely affect TMTG’s business.

In addition, because TMTG may obtain TMTG+ subscribers’ billing information on its website, TMTG likely may not obtain signatures from subscribers in connection with the use of credit cards by them. Under current credit card practices, to the extent TMTG does not obtain cardholders’ signatures, TMTG is liable for fraudulent credit card transactions, even where the associated financial institution approves payment of the orders. TMTG does not currently carry insurance against the risk of fraudulent credit card transactions. A failure to adequately control fraudulent credit card transactions would harm TMTG’s business and results of operations.

 

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Any future problems with TMTG’s billing software may have an adverse effect on TMTG+’s subscriber satisfaction and may cause one or more of the major credit companies to disallow TMTG’s continued use of their payment products. In addition, if TMTG’s billing software fails and TMTG fails to bill subscribers TMTG’s cash flow and results of operations will be affected adversely.

Improper access to or disclosure of TMTG’s users’ information could harm TMTG’s reputation and adversely affect TMTG’s business.

TMTG’s efforts to protect the information that TMTG’s users have chosen to share using TruthSocial may be unsuccessful due to the actions of third parties, software bugs or other technical malfunctions, employee error or malfeasance, or other factors. In addition, third parties may attempt to fraudulently induce employees or users to disclose information in order to gain access to TMTG’s data or TMTG’s users’ data. If any of these events occur, TMTG’s users’ information could be accessed or disclosed improperly. TruthSocial’s Data Privacy Policy governs the use of information that users have chosen to share using TruthSocial. Some platform developers may store information provided by TMTG’s users through apps on the TruthSocial platform or websites integrated with TruthSocial. If these third parties or platform developers fail to adopt or adhere to adequate data security practices or fail to comply with TMTG’s terms and policies, or in the event of a breach of their networks, TMTG’s users’ data may be improperly accessed or disclosed. Any incidents involving unauthorized access to or improper use of the information of TMTG’s users could damage TMTG’s reputation and TMTG’s brand and diminish TMTG’s competitive position. In addition, the affected users or government authorities could initiate legal or regulatory action against TMTG in connection with such incidents, which could cause TMTG to incur significant expense and liability or result in orders or consent decrees forcing TMTG to modify its business practices. Any of these events could have a material and adverse effect on TMTG’s business, reputation or financial results.

Unfavorable media coverage could negatively affect TMTG’s business.

TMTG may receive a high degree of media coverage around the world. Unfavorable publicity regarding, for example, TMTG’s privacy practices, product changes, product quality, litigation or regulatory activity, or the actions of TMTG’s platform or streaming services developers or TMTG’s users, could adversely affect TMTG’s reputation and its ability to transact with its third-party providers. Such negative publicity also could have an adverse effect on the size, engagement, and loyalty of TMTG’s user base and result in decreased revenue, which could adversely affect TMTG’s business and financial results.

TMTG’s intellectual property may be infringed upon and others have and may continue to accuse TMTG of infringing on their intellectual property, either of which could adversely affect TMTG’s business and result in very expensive litigation.

In recent years, there has been significant litigation in the United States over patents and other intellectual property rights. Although TMTG in not engaged in such litigation, in the future TMTG or customers who use TMTG’s products may unintentionally infringe the trademarks, copyrights, patents and other intellectual property rights of third parties, including allegations made by TMTG’s competitors or by non-practicing entities. TMTG cannot predict whether assertions of third-party intellectual property rights or claims arising from these assertions will substantially harm TMTG’s business and operating results. If TMTG is forced to defend any infringement claims, whether they are with or without merit or are ultimately determined in TMTG’s favor, TMTG may face costly litigation and diversion of technical and management personnel. Some of TMTG’s competitors have substantially greater resources than TMTG does and are able to sustain the cost of complex intellectual property litigation to a greater extent and for longer periods of time than TMTG could. Furthermore, an adverse outcome of a dispute may require TMTG: to pay damages, potentially including treble damages and attorneys’ fees, if TMTG is found to have willfully infringed a party’s patent or other intellectual property rights; to cease making, licensing or using products that are alleged to incorporate or make use of the intellectual property of others; to expend additional development resources to redesign TMTG’s products; and to enter into potentially unfavorable

 

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royalty or license agreements in order to obtain the rights to use necessary technologies. Royalty or licensing agreements, if required, may be unavailable on terms acceptable to TMTG, or at all. In any event, TMTG may need to license intellectual property which would require TMTG to pay royalties or make one-time payments. Even if these matters do not result in litigation or are resolved in TMTG’s favor or without significant cash settlements, the time and resources necessary to resolve them could harm TMTG’s business, operating results, financial condition and reputation.

In addition, if TMTG’s advertising customers do not own the copyright for advertising content included in their advertisements or if digital media property owners do not own the copyright for content to the digital media next to which the advertisements appear, advertisers and digital media properties could receive complaints from copyright owners, which could harm TMTG’s reputation and TMTG’s business.

As such, litigation diverts the time and resources of management, regardless of the merits of the claim. There can be no assurance that TMTG would prevail in any future litigation relating to TMTG’s licensing agreements. If TMTG were to lose such a case and be required to cease the sale of certain products or the use of certain technology or were forced to pay monetary damages, the results could adversely affect TMTG’s business and reputation.

TMTG must comply with licenses related to the use of free, publicly-available software incorporated in TruthSocial products; failure to do so could cause the loss of the ability to use such software which could in turn adversely affect TMTG’s revenues and results of operations.

In October 2021, Software Freedom Conservancy (“SFC”) policy fellow Bradley M. Kuhn has accused TMTG of violating the licensing agreement for the free, publicly available software platform, Mastodon. Although any entity can use the code from Mastodon, according to the licensing agreement (AGPLv3), each user of the software must receive “an opportunity to receive the entire Corresponding Source for the website based on that code.” Early users of TruthSocial, Kuhn alleged, did not receive the source code.

On October 26, 2021, Mastodon sent a letter requesting that the TruthSocial source code be made publicly available in compliance with the license. TMTG has since taken action to resolve this issue by publishing its source code.

TMTG operates in new and evolving industries. TMTG may not be able to respond to changes in market conditions or to new or emerging technologies.

You should take into account the risks and uncertainties frequently encountered by new companies in rapidly evolving markets. TMTG’s financial results in any given quarter can be influenced by numerous factors, many of which TMTG is unable to predict or is outside of TMTG’s control, including:

 

   

TMTG’s ability to maintain and grow TMTG’s user base and user engagement;

 

   

TMTG’s ability to attract and retain advertisers in a particular period;

 

   

seasonal fluctuations in spending by TMTG’s advertisers;

 

   

the number of ads shown to users;

 

   

the pricing of TMTG’s ads and other products;

 

   

TMTG’s ability to increase payments and other fees revenue;

 

   

the diversification and growth of revenue sources beyond advertising and payments;

 

   

the development and introduction of new products or services by us or TMTG’s competitors;

 

   

increases in marketing, sales, and other operating expenses that TMTG may incur to grow and expand TMTG’s operations and to remain competitive;

 

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TMTG’s ability to maintain gross margins and operating margins;

 

   

TMTG’s ability to obtain equipment and components for TMTG’s data centers and other technical infrastructure in a timely and cost-effective manner;

 

   

system failures or breaches of security or privacy;

 

   

inaccessibility of TruthSocial due to third-party actions;

 

   

adverse litigation judgments, settlements, or other litigation-related costs;

 

   

changes in the legislative or regulatory environment, including with respect to privacy, or enforcement by government regulators, including fines, orders, or consent decrees;

 

   

fluctuations in currency exchange rates and changes in the proportion of TMTG’s revenue and expenses denominated in foreign currencies;

 

   

fluctuations in the market values of TMTG’s portfolio investments and in interest rates;

 

   

changes in U.S. GAAP; and

 

   

changes in business or macroeconomic conditions.

TMTG’s business is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and other matters. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to TMTG’s business practices, increased cost of operations, or declines in user growth or engagement, or otherwise harm TMTG’s business.

TMTG is subject to a variety of laws and regulations in the United States and abroad that involve matters central to TMTG’s business, including user privacy, rights of publicity, data protection, content, intellectual property, distribution, electronic contracts and other communications, competition, protection of minors, consumer protection, taxation, and online payment services. Foreign data protection, privacy, and other laws and regulations are often more restrictive than those in the United States. These U.S. federal and state and foreign laws and regulations are constantly evolving and can be subject to significant change. In addition, the application and interpretation of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which TMTG operates. For example, the interpretation of some laws and regulations that govern the use of names and likenesses in connection with advertising and marketing activities is unsettled and developments in this area could affect the manner in which TMTG designs TMTG’s products, as well as TMTG’s terms of use. A number of proposals are pending before federal, state, and foreign legislative and regulatory bodies that could significantly affect TMTG’s business. For example, a revision to the 1995 European Union Data Protection Directive is currently being considered by European legislative bodies that may include more stringent operational requirements for data processors and significant penalties for non-compliance. Similarly, there have been a number of recent legislative proposals in the United States, at both the federal and state level, that would impose new obligations in areas such as privacy and liability for copyright infringement by third parties. These existing and proposed laws and regulations can be costly to comply with and can delay or impede the development of new products, result in negative publicity, increase TMTG’s operating costs, require significant management time and attention, and subject us to claims or other remedies, including fines or demands that TMTG modify or cease existing business practices.

If TMTG’s security measures are breached, or if TMTG’s products and services are subject to attacks that degrade or deny the ability of users to access TMTG’s products and services, TMTG’s products and services may be perceived as not being secure, users and advertisers may curtail or stop using TMTG’s products and services and TMTG’s business and operating results could be harmed.

TMTG’s products and services involve the storage and transmission of users’ and advertisers’ information, and security breaches expose it to a risk of loss of this information, litigation and potential liability. TMTG may experience cyber-attacks of varying degrees on a regular basis, and as a result, unauthorized parties may obtain

 

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access to TMTG’s data or TMTG’s users’ or advertisers’ data. TMTG’s security measures may also be breached due to employee error, malfeasance or otherwise. Additionally, outside parties may attempt to fraudulently induce employees, users or advertisers to disclose sensitive information in order to gain access to TMTG’s data or TMTG’s users’ or advertisers’ data or accounts, or may otherwise obtain access to such data or accounts. Since TMTG’s users and advertisers may use their TruthSocial accounts to establish and maintain online identities, unauthorized communications from TruthSocial accounts that have been compromised may damage their reputations and brands as well as TMTG’s. Any such breach or unauthorized access could result in significant legal and financial exposure, damage to TMTG’s reputation and a loss of confidence in the security of TMTG’s products and services that could have an adverse effect on TMTG’s business and operating results. Because the techniques used to obtain unauthorized access, disable, or degrade service or sabotage systems change frequently and often are not recognized until launched against a target, TMTG may be unable to anticipate these techniques or to implement adequate preventative measures. If an actual or perceived breach of TMTG’s security occurs, the market perception of the effectiveness of TMTG’s security measures could be harmed, TMTG could lose users and advertisers and TMTG may incur significant legal and financial exposure, including legal claims and regulatory fines and penalties. Any of these actions could have a material and adverse effect on TMTG’s business, reputation, and operating results.

TMTG may face lawsuits or incur liability as a result of content published on TruthSocial and TMTG+.

TMTG may face claims relating to content that is published or made available through TMTG’s products and services or third-party products or services. In particular, the nature of TMTG’s business exposes it to claims related to defamation, intellectual property rights, rights of publicity and privacy, illegal content, content regulation and personal injury torts. The law relating to the liability of providers of online products or services for activities of their users remains somewhat unsettled, both within the United States and internationally. This risk may be enhanced in certain jurisdictions outside the United States where TMTG may be less protected under local laws than TMTG is in the United States. In addition, the public nature of communications on TMTG’s network exposes it to risks arising from the creation of impersonation accounts intended to be attributed to TMTG’s users or advertisers. TMTG could incur significant costs investigating and defending these claims. If TMTG incurs costs or liability as a result of these events occurring, TMTG’s business, financial condition and operating results could be adversely affected.

Many of TMTG’s products and services rely on, incorporate, and/or license open source software, which may pose particular risks to TMTG’s proprietary software, products, and services in a manner that could have a negative effect on TMTG’s business.

TMTG uses and plans to continue using open-source software in its products and services. For example, TruthSocial was built using an AGPLv3 license (also referred to “copyleft” or a “viral license”). In addition, TMTG may contribute software source code to existing open-source projects, such as Mastodon, pursuant to applicable licenses or release internal software projects under open-source licenses and anticipate doing so in the future. The terms of many licenses to which TMTG is or is likely to become subject to have not been interpreted by U.S. or foreign courts, and there is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on TMTG’s ability to provide or distribute TMTG’s products or services. Additionally, TMTG may from time-to-time face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that TMTG developed using such software, (which could include TMTG’s proprietary source code), or otherwise seeking to enforce the terms of an applicable license in a manner adverse to TMTG’s interests. These claims could result in litigation and could require TMTG to make its software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until TMTG can re-engineer them to avoid infringement. TMTG is proactively working to mitigate these risks by developing technical solutions to these potential challenges. However, this re-engineering process could require significant additional research and development resources, and TMTG may not be able to complete it successfully. In addition to risks related to license requirements, use of certain open-source software can lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide

 

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warranties or controls on the origin of software. Additionally, because any software source code TMTG contributes to open-source projects is publicly available, TMTG’s ability to protect TMTG’s intellectual property rights with respect to such software source code may be limited or lost entirely, and TMTG is unable to prevent TMTG’s competitors or others from using such contributed software source code. Any of these risks could be difficult to eliminate or manage, and, if not addressed, could have a negative effect on TMTG’s business, financial condition, and operating results.

TMTG may rely in part on application marketplaces and Internet search engines to drive traffic to TMTG’s products and services, and if TMTG fails to appear high up in the search results or rankings, traffic to TruthSocial could decline and TMTG’s business and operating results could be adversely affected.

Although TMTG is actively building a web application for TruthSocial, TMTG may rely on application marketplaces, such as Apple’s App Store and Google’s Play, to drive downloads of TMTG’s mobile application. In the future, Apple, Google, or other operators of application marketplaces may make changes to their marketplaces which make access to TMTG’s products and services more difficult or impossible. Additionally, third parties may attempt to pressure Apple and Google to remove TruthSocial from their application marketplaces, and such removal may constitute a force majeure event under the operative version of TMTG’s License Agreement with President Trump.

TMTG may also depend in part on Internet search engines, such as Google, Bing, and Yahoo!, to drive traffic to TruthSocial. For example, when a user types an inquiry into a search engine, TMTG may rely on a high organic search result ranking of TMTG’s web pages in these search results to refer the user to TruthSocial. However, TMTG’s ability to maintain high organic search result rankings is not within TMTG’s control. TMTG’s competitors’ search engine optimization (“SEO”) efforts may result in their websites receiving a higher search result page ranking than TMTG’s, or Internet search engines could revise their methodologies in a way that would adversely affect TMTG’s search result rankings. For example, Google has integrated its social networking offerings, including Google+, with certain of its products, including search, which could negatively impact the organic search ranking of TMTG’s web pages. If Internet search engines modify their search algorithms in ways that are detrimental to us, or if TMTG’s competitors’ SEO efforts are more successful than TMTG’s, the growth in TruthSocial’s user base could slow. TMTG anticipates fluctuations in search result rankings in the future. Any reduction in the number of users directed to TMTG’s mobile applications or website through application marketplaces and search engines could harm TMTG’s business and operating results.

More people are using devices other than personal computers to access the Internet and new platforms to produce and consume content, and TMTG needs to promote the adoption of TMTG’s mobile applications, and TMTG’s business and operating results may be harmed if TMTG is unable to do so.

The number of people who access the Internet through devices other than personal computers, including mobile phones, smartphones, handheld computers such as net books and tablets, video game consoles and television set-top devices, has increased dramatically in the past few years. There are 7.26 billion smart and feature phone users worldwide, including 6.65 billion smartphone users worldwide in 2022. Since TMTG may generate a majority of TMTG’s advertising revenue through users on mobile devices, TMTG must continue to drive adoption of TMTG’s mobile applications. In addition, mobile users frequently change or upgrade their mobile devices. TMTG’s business and operating results may be harmed if TMTG’s users do not install TruthSocial application when they change or upgrade their mobile device. In addition, as new devices and platforms are continually being released, users may consume content in a manner that is more difficult to monetize. It is difficult to predict the problems TMTG may encounter in adapting TMTG’s products and services and developing competitive new products and services that are compatible with new devices or platforms. If TMTG is unable to develop products and services that are compatible with new devices and platforms, or if TMTG is unable to drive continued adoption of TMTG’s mobile applications, TMTG’s business and operating results may be harmed.

 

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If TMTG fails to maintain an effective system of disclosure controls and internal controls over financial reporting, TMTG’s ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.

As a public company, the Combined Entity will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the listing standards of Nasdaq. TMTG expect that the requirements of these rules and regulations will continue to increase TMTG’s legal, accounting, and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant strain on TMTG’s personnel, systems, and resources.

The Sarbanes-Oxley Act requires, among other things, that TMTG maintain effective disclosure controls and procedures and internal control over financial reporting. TMTG intends to develop and refine TMTG’s disclosure controls and other procedures that are designed to ensure that information required to be disclosed by TMTG in the reports that TMTG will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to TMTG’s principal executive and financial officers. TMTG intends to improve TMTG’s internal control over financial reporting. In order to maintain and improve the effectiveness of TMTG’s disclosure controls and procedures and internal control over financial reporting, TMTG anticipates that TMTG will continue to expend significant resources, including accounting-related costs and significant management oversight.

TMTG’s controls may become inadequate because of changes in conditions in TMTG’s business. Further, weaknesses in TMTG’s disclosure controls or TMTG’s internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm TMTG’s operating results or cause us to fail to meet TMTG’s reporting obligations and may result in a restatement of TMTG’s financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of management evaluations and independent registered public accounting firm audits of TMTG’s internal control over financial reporting that TMTG will eventually be required to include in TMTG’s periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in TMTG, which would likely have a negative effect on the trading price of TMTG’s common stock. In addition, if TMTG is unable to continue to meet these requirements, TMTG may not be able to remain listed on Nasdaq.

Upon becoming a public company, the Combined Entity will be required to provide an annual management report on the effectiveness of its internal control over financial reporting commencing with its annual report on Form 10-K. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on TMTG’s business and operating results and cause a decline in the price of the Combined Entity’s common stock.

If currency exchange rates fluctuate substantially in the future, TMTG’s operating results, which are reported in U.S. dollars, could be adversely affected.

TMTG intends to expand international operations. As a result, TMTG will become more exposed to the effects of fluctuations in currency exchange rates. TMTG may incur expenses for employee compensation and other operating expenses at TMTG’s international locations in the local currency and accept payment from advertisers or data partners in currencies other than the U.S. dollar. Since TMTG may conduct business in currencies other than U.S. dollars but report TMTG’s operating results in U.S. dollars, TMTG face exposure to fluctuations in currency exchange rates. Consequently, exchange rate fluctuations between the U.S. dollar and other currencies could have a material impact on TMTG’s operating results.

 

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TMTG’s business is subject to the risks of earthquakes, fire, power outages, floods, and other catastrophic events, and to interruption by man-made problems such as terrorism.

A significant natural disaster, such as an earthquake, fire, flood, or significant power outage could have a material adverse impact on TMTG’s business, operating results, and financial condition. TMTG does not carry business interruption insurance sufficient to compensate us for the potentially significant losses, including the potential harm to TMTG’s business that may result from interruptions in TMTG’s ability to provide TMTG’s products and services.

If TMTG’s trademarks and other proprietary rights are not adequately protected to prevent use or appropriation by TMTG’s competitors, the value of TMTG’s brand and other intangible assets may be diminished, and TMTG’s business may be adversely affected. If TMTG is unable to protect TMTG’s intellectual property, or to successfully register the pending “Truth Social” trademark with the USPTO, the value of TMTG’s brand and other intangible assets may be diminished, and TMTG’s business may be adversely affected.

TMTG intends to rely on a combination of confidentiality and license agreements with TMTG’s employees, consultants, and third parties with whom TMTG develops relationships, as well as trademark, copyright, patent, trade secret, and domain name protection laws, to protect TMTG’s proprietary rights. TMTG has filed various applications for protection of certain aspects of TMTG’s intellectual property. However, third parties may knowingly or unknowingly infringe TMTG’s proprietary rights, third parties may challenge any proprietary rights held by TMTG, and pending and future trademark and patent applications may not be approved.

In February 2022, the USPTO received a Letter of Protest from Vero Labs, Inc., owner of U.S. registrations for the trademark, “VERO – TRUE SOCIAL,” in connection with the pending U.S. trademark application for “TRUTH SOCIAL.” On April 5, 2022, the USPTO issued an office Action with respect to the pending U.S. trademark application for “TRUTH SOCIAL” citing the “VERO – TRUE SOCIAL” registrations against the pending application. TMTG intends to respond to the USPTO’s Office Action with arguments in favor of registration of the “TRUTH SOCIAL” trademark. There is no guarantee that the USPTO will accept the arguments presented and agree to register the “TRUTH SOCIAL” Trademark. In the event we are unable to successfully register the pending “TRUTH SOCIAL” trademark, we may seek to change the name of our social media platform or reach an accommodation of the “VERO – TRUE SOCIAL” trademark to permit us to use “TRUTH SOCIAL.” In addition, effective intellectual property protection may not be available in every country in which TMTG operates or intends to operate TMTG’s business. In any or all of these cases, TMTG may be required to expend significant time and expense in order to prevent infringement or to enforce TMTG’s rights. Although TMTG intends to take measures to protect TMTG’s proprietary rights, there can be no assurance that others will not offer products or concepts that are substantially similar to TMTG’s and compete with TMTG’s business. In addition, TMTG may contribute software source code under open source licenses and may make other technology developed by it available under other open licenses, and TMTG may include open source software in TMTG’s products. As a result of any future TMTG’s open source contributions and the use of open source in TMTG’s products, TMTG may license or be required to license innovations that turn out to be material to TMTG’s business and may also be exposed to increased litigation risk. If the protection of TMTG’s proprietary rights is inadequate to prevent unauthorized use or appropriation by third parties, the value of TMTG’s brand and other intangible assets may be diminished and competitors may be able to more effectively mimic TMTG’s service and methods of operations. Any of these events could have an adverse effect on TMTG’s business and financial results.

Trademark, copyright, patent, and other intellectual property rights are important to TMTG and other companies. TMTG’s intellectual property rights extend to TMTG’s technology, business processes and the content on TMTG’s website. TMTG intends to use the intellectual property of third parties in merchandising TMTG’s products and marketing TMTG’s service through contractual and other rights. If there is any claim against TMTG for infringement, misappropriation, misuse or other violation of third party intellectual property rights, and TMTG is unable to obtain sufficient rights or develop non-infringing intellectual property or

 

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otherwise alter TMTG’s business practices, as appropriate, on a timely basis, TMTG’s business and competitive position may be affected adversely. Many companies are devoting significant resources to developing patents that could potentially affect many aspects of TMTG’s business. There are numerous patents that broadly claim means and methods of conducting business on the Internet. TMTG has not exhaustively searched patents relative to TMTG’s technology. TMTG may be accused of infringing certain of these patents. In addition, other parties may assert infringement or unfair competition, or other intellectual property claims against TMTG that could relate to any aspect of TMTG’s technology, business processes, merchandizing, and marketing activities or TMTG’s intellectual property rights. TMTG cannot predict whether third parties will assert claims of infringement against it, the subject matter of any of these claims or whether these assertions or prosecutions will adversely affect TMTG’s business. If TMTG is forced to defend itself against any of these claims, whether they are with or without merit or are determined in TMTG’s favor, TMTG may face costly litigation, diversion of technical and management personnel, inability to use TMTG’s current website technology or inability to market TMTG’s service or merchandise TMTG’s products. As a result of a dispute, TMTG may have to develop non-infringing technology, enter into royalty or licensing agreements adjust TMTG’s merchandizing or marketing activities or take other action to resolve the claims. These actions, if required, may be unavailable on terms acceptable to us, costly or unavailable.

If TMTG is unable to protect TMTG’s domain names, TMTG’s reputation and brand could be affected adversely.

TMTG may hold various domain names relating to TMTG’s brand, including TMTGcorp.com and TruthSocial.com. Failure to protect TMTG’s domain names could affect adversely TMTG’s reputation and brand and make it more difficult for users to find TMTG’s website and TMTG’s service. The acquisition and maintenance of domain names generally are regulated by governmental agencies and their designees. The regulation of domain names in the United States may change in the near future. Governing bodies may establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. As a result, TMTG may be unable to acquire or maintain relevant domain names. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is unclear. TMTG may be unable to prevent third parties from acquiring domain names that are similar to, infringe upon, or otherwise decrease the value of TMTG’s trademarks and other proprietary rights.

In the future, TMTG may be involved in numerous class action lawsuits and other litigation matters that are expensive and time consuming, and, if resolved adversely, could harm TMTG’s business, financial condition or results of operations.

In addition to intellectual property and licensing claims, TMTG may also be involved in numerous other lawsuits, including putative class action lawsuits brought by users and advertisers, many of which claim statutory damages. In fact, TMTG anticipates that TMTG will continue to be a target for numerous lawsuits in the future. If TMTG is able to build an expansive user base, the plaintiffs in class action cases filed against TMTG typically will claim enormous monetary damages even if the alleged per-user harm is small or non-existent. Any litigation to which TMTG may in the future be a party may result in an onerous or unfavorable judgment that may not be reversed upon appeal, or TMTG may decide to settle lawsuits on similarly unfavorable terms. Any such negative outcome could result in payments of substantial monetary damages or fines, or changes to TMTG’s products or business practices, and accordingly TMTG’s business, financial condition, or results of operations could be materially and adversely affected. However, defending any future claims may be costly and can impose a significant burden on management and employees, and TMTG may receive unfavorable preliminary or interim rulings in the course of litigation, which could adversely affect the market price of the Combined Entity’s common stock. There can be no assurances that a favorable final outcome will be obtained in any cases in the future.

 

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President Trump has significant influence over key decision making as a result of his control of a significant portion of TMTG’s voting stock.

President Trump, TMTG’s Chairman, will be able to exercise voting rights with respect to an aggregate of approximately 73.3 million shares of common stock, representing approximately 57.8% of the voting power of the outstanding common stock following the Business Combination assuming no redemptions and no conversion of the Preferred Stock, or approximately 46.8% of the voting power of the common stock assuming full conversion of the Preferred Stock at the initial conversion price. As a result, President Trump will have the ability to significantly influence the outcome of matters submitted to the Combined Entity’s stockholders for approval, including the election of directors and any merger, consolidation, or sale of all or substantially all of the Combined Entity’s assets. In addition, President Trump will have the ability to significantly influence the management and affairs of the Combined Entity as a result of his position as its Chairman and the ability to control the election of the Combined Entity’s directors. Additionally, in the event that President Trump controls the Combined Entity at the time of his death, control may be transferred to a person or entity that he designates as his successor. As a board member, President Trump will owe a fiduciary duty to the Combined Entity’s stockholders and must act in good faith in a manner he reasonably believes to be in the best interests of the Combined Entity’s stockholders. As a stockholder, even a controlling stockholder, President Trump is entitled to vote his shares in his own interests, which may not always be in the interests of the Combined Entity’s stockholders generally.

TMTG cannot be certain that additional financing will be available on reasonable terms when required, or at all.

From time to time, TMTG may need additional financing. TMTG’s ability to obtain additional financing, if and when required, will depend on investor demand, TMTG’s operating performance, the condition of the capital markets, and other factors. If TMTG raises additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences, or privileges senior to the rights of the Combined Entity’s common stock, and TMTG’s existing stockholders may experience dilution.

TMTG’s costs may grow more quickly than TMTG’s revenue, harming TMTG’s business and profitability.

TMTG expects its expenses to continue to increase in the future as it broadens its user base, as users increase the number of connections and amount of data they share with us, as TMTG develops and implement new product features that require more computing infrastructure, and as TMTG hires additional employees. TMTG expects to incur increasing costs, in particular for servers, storage, power, and data centers, to support TMTG’s anticipated future growth. TMTG expects to continue to invest in TMTG’s infrastructure in order to provide TMTG’s products rapidly and reliably to all users around the world, including in countries where TMTG does not expect significant short-term monetization. TMTG’s expenses may be greater than TMTG anticipates, and TMTG’s investments to make TMTG’s business and TMTG’s technical infrastructure more efficient may not be successful. In addition, TMTG may increase marketing, sales, and other operating expenses in order to grow and expand TMTG’s operations and to remain competitive. Increases in TMTG’s costs may adversely affect TMTG’s business and profitability.

TMTG’s business is dependent on its ability to maintain and scale TMTG’s technical infrastructure, and any significant disruption in TMTG’s service could damage TMTG’s reputation, result in a potential loss of users and engagement, and adversely affect TMTG’s financial results.

TMTG’s reputation and ability to attract, retain, and serve TMTG’s users is dependent upon the reliable performance of TruthSocial and TMTG+ and TMTG’s underlying technical infrastructure. TMTG’s systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays or outages or service disruptions that could be harmful to TMTG’s business. If TruthSocial and TMTG+ is unavailable when users attempt to access it, or if it does not load as quickly as they expect, users may not return to TMTG’s website as often in the future, or at all. As TMTG’s user base and the amount and types of information shared on

 

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TruthSocial and TMTG+ continue to grow, TMTG will need an increasing amount of technical infrastructure, including network capacity, and computing power, to continue to satisfy the needs of TMTG’s users. It is possible that TMTG may fail to effectively scale and grow TMTG’s technical infrastructure to accommodate these increased demands. In addition, as stated above, TMTG’s business is subject to interruptions, delays, or failures resulting from earthquakes, other natural disasters, terrorism, or other catastrophic events.

A substantial portion of TMTG’s network infrastructure will be provided by third parties. Any disruption or failure in the services TMTG receives from these providers could harm TMTG’s ability to handle new or increased traffic and could significantly harm TMTG’s business. Any financial or other difficulties these providers face may adversely affect TMTG’s business, and TMTG exercise little control over these providers, which increases TMTG’s vulnerability to problems with the services they provide.

TMTG’s software is highly technical, and if it contains undetected errors, TMTG’s business could be adversely affected. TMTG’s business and operating results may be harmed by a disruption in TMTG’s service, or by TMTG’s failure to timely and effectively scale and adapt TMTG’s existing technology and infrastructure.

One of the reasons people will come to TruthSocial is for real-time information. TMTG in the future may experience service disruptions, outages, and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, hardware failure, capacity constraints due to an overwhelming number of people accessing TMTG’s products and services simultaneously, computer viruses and denial of service or fraud or security attacks. Although TMTG will invest significantly to improve the capacity, capability, and reliability of TMTG’s infrastructure, TMTG cannot guarantee that TMTG will serve all traffic equally through data centers that support TMTG’s platform. Accordingly, in the event of a significant issue at a data center supporting significant network traffic, some of TMTG’s products and services may become inaccessible to the public or the public may experience difficulties accessing TMTG’s products and services. Any disruption or failure in TMTG’s infrastructure could hinder TMTG’s ability to handle existing or increased traffic on TMTG’s platform, which could significantly harm TMTG’s business.

As the number of TMTG’s users increases and TMTG’s users generate more content, including photos and videos hosted by TruthSocial, TMTG may be required to expand and adapt TMTG’s technology and infrastructure to continue to reliably store, serve and analyze this content. It may become increasingly difficult to maintain and improve the performance of TMTG’s products and services, especially during peak usage times, as TMTG’s products and services become more complex and TMTG’s user traffic increases. In addition, because TMTG may lease TMTG’s data center facilities, TMTG cannot be assured that TMTG will be able to expand TMTG’s data center infrastructure to meet user demand in a timely manner, or on favorable economic terms. If TMTG users are unable to access TruthSocial or TMTG+ or TMTG is not able to make information available rapidly on TruthSocial, users may seek other channels to obtain the information, and may not return to TruthSocial or use TruthSocial as often in the future, or at all. This would negatively impact TMTG’s ability to attract users and advertisers and increase engagement of TMTG’s users. TMTG expects to continue to make significant investments to maintain and improve the capacity, capability, and reliability of TMTG’s infrastructure. To the extent that TMTG does not effectively address capacity constraints, upgrade TMTG’s systems as needed and continually develop TMTG’s technology and infrastructure to accommodate actual and anticipated changes in technology, TMTG’s business and operating results may be harmed.

TMTG’s products may incorporate software that is highly technical and complex. TMTG’s software may now or in the future contain, undetected errors, bugs, or vulnerabilities. Some errors in TMTG’s software code may only be discovered after the code has been released. Any errors, bugs, or vulnerabilities discovered in TMTG’s code after release could result in damage to TMTG’s reputation, loss of users, loss of revenue, or liability for damages, any of which could adversely affect TMTG’s business and financial results.

 

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TMTG cannot assure you that TMTG will effectively manage TMTG’s growth. If TMTG fails to effectively manage its growth, TMTG’s business and operating results could be harmed.

TMTG may experience rapid growth in TMTG’s headcount and operations, which will place significant demands on TMTG’s management and operational and financial infrastructure. TMTG intends to make substantial investments to expand TMTG’s operations, research and development, sales and marketing and general and administrative organizations, as well as TMTG’s international operations. TMTG may face significant competition for employees, particularly engineers, designers and product managers, from other Internet and high-growth companies, which include both publicly-traded and privately-held companies, and TMTG may not be able to hire new employees quickly enough to meet TMTG’s needs. To attract highly skilled personnel, TMTG believes it will need to offer highly competitive compensation packages. As TMTG continues to grow, TMTG may be subject to the risks of over-hiring, over-compensating TMTG’s employees and over-expanding TMTG’s operating infrastructure, and to the challenges of integrating, developing, and motivating a rapidly growing employee base in various countries around the world. In addition, TMTG may not be able to innovate or execute as quickly as a smaller, more efficient organization. If TMTG fails to effectively manage TMTG’s hiring needs and successfully integrate TMTG’s new hires, TMTG’s efficiency and ability to meet TMTG’s forecasts and TMTG’s employee morale, productivity and retention could suffer, and TMTG’s business and operating results could be adversely affected.

The growth and expansion of TMTG’s business and products create significant challenges for TMTG’s management, operational, and financial resources, including managing multiple relations with users, advertisers, platform developers, and other third parties. In the event of continued growth of TMTG’s operations or in the number of TMTG’s third-party relationships, TMTG’s information technology systems or TMTG’s internal controls and procedures may not be adequate to support TMTG’s operations. In addition, some members of TMTG’s management do not have significant experience managing a large global business operation, so TMTG’s management may not be able to manage such growth effectively. To effectively manage TMTG’s growth, TMTG must continue to improve TMTG’s operational, financial, and management processes and systems and to effectively expand, train, and manage TMTG’s employee base. As TMTG’s organization continues to grow, and TMTG is required to implement more complex organizational management structures, TMTG may find it increasingly difficult to maintain the benefits of TMTG’s corporate culture, including TMTG’s ability to quickly develop and launch new and innovative products. This could negatively affect TMTG’s business performance.

Computer malware, viruses, hacking, and phishing attacks, and spamming could harm TMTG’s business and results of operations. Spam could diminish the user experience on TMTG’s platform, which could damage TMTG’s reputation and deter TMTG’s current and potential users from using TMTG’s products and services.

Computer malware, viruses, hacking, and phishing attacks have become more prevalent in TMTG’s industry and may occur on TMTG’s systems in the future. Because of TMTG’s prominence, TMTG believes that TMTG is particularly attractive target for such attacks. Though it is difficult to determine what, if any, harm may directly result from any specific interruption or attack, any failure to maintain performance, reliability, security, and availability of TMTG’s products and technical infrastructure to the satisfaction of TMTG’s users may harm TMTG’s reputation and TMTG’s ability to retain existing users and attract new users.

“Spam” on TruthSocial refers to a range of abusive activities that are prohibited by TMTG’s terms of service and is generally defined as unsolicited, repeated actions that negatively impact other users with the general goal of drawing user attention to a given account, site, product or idea. This includes posting large numbers of unsolicited mentions of a user, duplicating Truths, misleading links (e.g., to malware or click-jacking pages) or other false or misleading content, and aggressively following and un-following accounts, adding users to lists, sending invitations, retruthing and favoriting Truths to inappropriately attract attention. TMTG’s terms of service also prohibit the creation of serial or bulk accounts, using automation, for disruptive or abusive purposes, such as to truth spam or to artificially inflate the popularity of users seeking to promote themselves on TruthSocial. Although TMTG will continue to invest resources to reduce spam on TruthSocial, TMTG expects

 

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spammers will continue to seek ways to act inappropriately on TMTG’s platform. In addition, TMTG expects that increases in the number of users on TMTG’s platform will result in increased efforts by spammers to misuse TMTG’s platform. TMTG cannot guarantee you that TMTG will successfully continuously combat spam, including by suspending or terminating accounts TMTG believes to be spammers and launching algorithmic changes focused on curbing abusive activities. TMTG’s actions to combat spam require the diversion of significant time and focus of TMTG’s engineering team from improving TMTG’s products and services. If spam increases on TruthSocial, this could hurt TMTG’s reputation for delivering relevant content or reduce user growth and user engagement and result in continuing operational cost to us.

In addition, spammers attempt to use TMTG’s products to send targeted and untargeted spam messages to users, which may embarrass or annoy users and make TruthSocial less user-friendly. TMTG cannot be certain that the technologies and employees tasked with defeating spamming attacks will be able to eliminate all spam messages from being sent on TMTG’s platform. As a result of spamming activities, TMTG’s users may use TruthSocial less or stop using TMTG’s products altogether.

Misleading solicitations and digital ads that are unaffiliated with TMTG could harm TMTG’s credibility or reputation.

People may solicit customers to TruthSocial, or purport to solicit customers to TruthSocial, without TMTG’s knowledge and may even get paid in the process. The fundraising committee of a U.S. Senator’s campaign has sent several email solicitations which claim to be an exclusive opportunity to sign up for a “brand-new social site” launched by President Trump. The email solicitations specifically urge its recipients to join TruthSocial with the following message, “please don’t be the reason Trump’s social site fails.” This could adversely impact TMTG user base who may find these misleading solicitations undesirable. It is possible that there are or will be more misleading advertisements or solicitations claiming affiliation with TMTG. If these misleading solicitations and ads damage the reputation of TMTG or the desire of people to use TruthSocial, TMTG’s results of operations may be adversely affected.

TMTG plans to expand its operations abroad where TMTG has limited operating experience and may be subject to increased business and economic risks that could affect TMTG’s financial results.

TMTG plans to expand TMTG’s business operations by offering TMTG’s products around the globe. TMTG may enter new international markets where TMTG has limited or no experience in marketing, selling, and deploying TMTG’s products. If TMTG fails to deploy or manage its operations in international markets successfully, its business may suffer. In addition, TMTG is subject to a variety of risks inherent in doing business internationally, including:

 

   

political, social, or economic instability;

 

   

risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, and unexpected changes in laws, regulatory requirements, and enforcement;

 

   

potential damage to TMTG’s brand and reputation due to compliance with local laws, including potential censorship or requirements to provide user information to local authorities;

 

   

fluctuations in currency exchange rates;

 

   

higher levels of credit risk and payment fraud;

 

   

enhanced difficulties of integrating any foreign acquisitions;

 

   

burdens of complying with a variety of foreign laws;

 

   

reduced protection for intellectual property rights in some countries;

 

   

difficulties in staffing and managing global operations and the increased travel, infrastructure, and legal compliance costs associated with multiple international locations;

 

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compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar laws in other jurisdictions; and

 

   

compliance with statutory equity requirements and management of tax consequences.

If TMTG is unable to manage the complexity of its global operations successfully, its financial results could be adversely affected.

TMTG plans to make acquisitions which could require significant management attention, disrupt its business, result in dilution to its stockholders, and adversely affect its financial results.

As part of its business strategy, TMTG intends to make acquisitions to add specialized employees, complementary companies, products, or technologies. However, TMTG has not made any such strategic acquisitions to date. As a result, its ability to successfully acquire and integrate larger or more significant companies, products, or technologies is unproven. In the future, TMTG may not be able to find other suitable acquisition candidates, and TMTG may not be able to complete acquisitions on favorable terms, if at all. TMTG’s future acquisitions may not achieve its goals, and any future acquisitions that TMTG completes could be viewed negatively by users, developers, advertisers, or investors. In addition, if TMTG fails to successfully integrate any acquisitions, or the technologies associated with such acquisitions, into TruthSocial, TMTG+ or any future product offerings, the revenue and operating results of the Combined Entity could be adversely affected. Any integration process may require significant time and resources, and TMTG may not be able to manage the process successfully. TMTG may not successfully evaluate or utilize the acquired technology or personnel, or accurately forecast the financial impact of an acquisition transaction, including accounting charges. TMTG may have to pay cash, incur debt, or issue equity securities to pay for any such acquisition, any of which could adversely affect TMTG’s financial results. The sale of equity or issuance of debt to finance any such acquisitions could result in dilution to TMTG’s stockholders. The incurrence of indebtedness would result in increased fixed obligations and could also include covenants or other restrictions that would impede TMTG’s ability to manage TMTG’s operations.

Risks Related to our Chairman President Donald J. Trump

TMTG’s success depends in part on the popularity of its brand and the reputation and popularity of its Chairman, President Donald J. Trump. The value of TMTG’s brand may diminish if the popularity of President Trump were to suffer. Adverse reactions to publicity relating to President Trump, or the loss of his services, could adversely affect TMTG’s revenues, results of operations and its ability to maintain or generate a consumer base.

While TMTG believes there is sufficient demand for a true free speech platform, the image, reputation, popularity and talent of its Chairman, President Trump will be important factors to its success. According to The Hill, only 30% of people surveyed would use a social media site associated with President Trump. In addition, according to a survey published in The New York Post, only 60% of Republicans would use such a platform. In order to be successful, TMTG will need millions of those people to register and regularly use TMTG’s platform. If President Trump becomes less popular or there are further controversies that damage his credibility or the desire of people to use a platform associated with him, and from which he will derive financial benefit, TMTG’s results of operations could be adversely affected.

The death or incapacity of President Trump, or discontinuation or limitation of his relationship with TMTG, may negatively impact TMTG’s business.

TMTG is highly dependent on the popularity and presence of President Trump, its Chairman and largest stockholder. President Trump has a significant influence on TMTG’s business plan. TMTG believes President Trump’s reputation and relationships are a critical element to the success of TMTG’s business. TMTG’s future success will depend, to a significant extent, upon the continued presence and popularity of President Trump. If

 

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President Trump were to discontinue his relationship with TMTG due to death, disability, or any other reason, or limit his involvement with TMTG due to becoming a candidate for political office, TMTG would be significantly disadvantaged.

President Trump is involved in numerous lawsuits and other matters that could damage his reputation, cause him to be distracted from the business or could force him to resign from TMTG’s board of directors. Additionally, TMTG’s business plan relies on President Trump bringing his former social media followers to its platform. In the event any of these, or other events cause his followers to lose interest in his messages, the number of users of TMTG’s platform could decline or not grow as TMTG has assumed.

A congressional committee is investigating President Trump’s role, if any, in violence at the United States Capitol on January 6, 2021. Two groups of U.S. Capitol Police officers, in two separate lawsuits, have sued President Trump for allegedly inciting riots on that date. U.S. Representatives Bennie Thompson and Eric Swalwell have, separately, also sued President Trump for allegedly inciting riots at the Capitol—and Rep. Swalwell has further claimed emotional distress.

There is also ongoing litigation involving President Trump related to the 2020 election. For example, the NAACP Legal Defense & Educational Fund filed a lawsuit against President Trump alleging that he violated the Voting Rights Act of 1965 and the Enforcement Act of 1871 by exerting pressure on state and local officials not to count or certify votes. In February 2021, the Fulton County, Georgia District Attorney’s office launched a criminal probe into President Trump’s alleged interference in the presidential election. In January 2022, the Fulton County District Attorney’s request to impanel a special grand jury – the members of which were selected in early May 2022 for a criminal investigation into President Trump was approved by the Fulton County Superior Court. A Pennsylvania poll worker sued President Trump for damages caused by alleged defamatory statements made by President Trump following the 2020 election. Eric Coomer, a former employee of Dominion Voting Systems, sued President Trump for alleged defamatory statements made by President Trump during the 2020 election.

Among other matters, the U.S. House of Representatives Committee on Oversight and Reform is investigating President Trump’s alleged destruction and removal of classified documents and White House records, as well as potential inaccurate financial statements filed by the Trump Organization in relation to the Trump Hotel in Washington, D.C. President Trump is the subject of separate investigations by the New York County (Manhattan) District Attorney, the New York Attorney General, and the Westchester County District Attorney to determine if the Trump Organization made false valuations of property to avoid tax liability and for other financial benefits. On April 25, 2022, a New York state court judge held President Trump in civil contempt for failing to comply with a subpoena for documents related to the New York Attorney General’s investigation of the Trump Organization. President Trump, along with his three eldest children (including Donald Trump, Jr., a TMTG board Member), are defendants in a class action lawsuit accusing them and The Trump Corporation of defrauding investors in exchange for secret payments from multiple companies. The Trump Organization recently paid $750,000 to settle a lawsuit filed by the District of Columbia accusing the organization of misusing nonprofit funds from the 58th Presidential Inaugural Committee.

A group of six protesters filed a lawsuit against President Trump alleging that President Trump and his co-defendants are liable for assault and battery after the protesters were attacked by Trump Tower security guards. President Trump is the defendant in a class action lawsuit filed by tenants of buildings once owned by the Trump family accusing them of fraud and racketeering. President Trump is the defendant in a lawsuit filed by his former personal attorney, Michael Cohen, seeking damages for alleged retaliatory imprisonment. The House Ways and Means Committee remains engaged in a yearslong attempt to obtain President Trump’s tax returns from the Treasury Department as part of an investigation into the IRS’s oversight of presidential tax returns.

President Trump is the defendant in a defamation lawsuit filed against him by E. Jean Carroll who claims that President Trump defamed her when he denied her allegations of sexual assault against him. In the past, President Trump has been involved in multiple lawsuits and settlements—and the subject of numerous accusations that did not result in legal action—related to sexual conduct and alleged misconduct.

 

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As a plaintiff, President Trump sued NY AG Letitia James to stop the investigation into the Trump Organization. President Trump sued New York City over its decision to cancel the Trump Organization’s contract to operate a golf course in the Bronx. President Trump sued Mary Trump and the New York Times for their disclosure and publication of his tax information. President Trump sued Twitter, for allegedly violating his First Amendment rights by banning him from its social media platform; this lawsuit was dismissed in May 2022.

The foregoing does not purport to be an exhaustive list. In June 2016, USA Today published an analysis of litigation involving President Trump, which found that over the previous three decades President Trump and his businesses had been involved in 3,500 legal cases in U.S. federal and state courts. Of the 3,500 suits, President Trump or one of his companies were plaintiffs in 1,900; defendants in 1,450; and bankruptcy, third party, or other in 150. President Trump was named personally in at least 169 suits in federal court. Over 150 other cases were in the Seventeenth Judicial Circuit Court of Florida (covering Broward County, Florida) since 1983. In the 1,300 cases where the record establishes the outcome, President Trump settled 175 times, lost 38, won 450, and had another 137 cases end with some other outcome. In the other 500 cases, judges dismissed plaintiffs’ claims against President Trump.

Although TMTG is not a party to any of the above-referenced matters, TMTG cannot predict what effect, if any, an adverse outcome to such matters, or even their continued existence, may have on President Trump’s personal reputation and TMTG’s business or prospects.

A publicly-traded entity controlled by President Trump has previously been subject to a cease and desist order issued by the Securities and Exchange Commission.

On January 16, 2002, the SEC issued a cease and desist order against Trump Hotels & Casino Resorts, Inc. (“THCR”) for violations of the anti-fraud provisions of the Exchange Act. As discussed in more detail in the SEC Release No. 45287, on October 25, 1999, THCR had issued a press release announcing its results for the third quarter of 1999 (the “Earnings Release”). To announce those results, the Earnings Release used a net income figure that differed from net income calculated in conformity with U.S. GAAP. Using that non-GAAP figure, the Earnings Release touted THCR’s purportedly positive operating results for the quarter and stated that the Company had beaten analysts’ earnings expectations. The Earnings Release was materially misleading because it created the false and misleading impression that THCR had exceeded earnings expectations primarily through operational improvements, when in fact it had not. The Earnings Release expressly stated that the net income figure excluded a one-time charge. The undisclosed one-time gain was material, because it represented the difference between positive trends in revenues and earnings and negative trends in revenues and earnings, and the difference between exceeding analysts’ expectations and falling short of them. SEC stated that by knowingly or recklessly issuing a materially misleading press release, THCR violated Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. The SEC accepted THCR’s offer of settlement.

Upon becoming a public company, the Combined Entity will be required to provide an annual management report on the effectiveness of its internal control over financial reporting commencing with its annual report on Form 10-K. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on its business and operating results and cause a decline in the price of the Combined Entity’s common stock.

A number of companies that were associated with President Trump have filed for bankruptcy. There can be no assurances that TMTG will not also become bankrupt.

Entities associated with President Trump have filed for bankruptcy protection. The Trump Taj Mahal, which was built and owned by President Trump, filed for Chapter 11 bankruptcy in 1991. The Trump Plaza, the Trump Castle, and the Plaza Hotel, all owned by President Trump at the time, filed for Chapter 11 bankruptcy in 1992. THCR, which was founded by President Trump in 1995, filed for Chapter 11 bankruptcy in 2004. Trump Entertainment Resorts, Inc., the new name given to Trump Hotels & Casino Resorts after its 2004 bankruptcy,

 

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declared bankruptcy in 2009. While all of the foregoing were in different businesses than TMTG, there can be no guarantee that TMTG’s performance will exceed the performance of those entities.

A number of companies that had license agreements with President Trump have failed. There can be no assurances that TMTG will not also fail.

Trump Shuttle, Inc., launched by President Trump in 1989, defaulted on its loans in 1990 and ceased to exist by 1992. Trump University, founded by President Trump in 2005, ceased operations in 2011 amid lawsuits and investigations regarding the company’s business practices. Trump Vodka, a brand of vodka produced by Drinks Americas under license from the Trump Organization, was introduced in 2005 and discontinued in 2011. Trump Mortgage, LLC, a financial services company founded by President Trump in 2006, ceased operations in 2007. GoTrump.com, a travel site founded by President Trump in 2006, ceased operations in 2007. Trump Steaks, a brand of steak and other meats founded by President Trump in 2007, discontinued sales two months after its launch. While all these businesses were in different industries than TMTG, there can be no guarantee that TMTG’s performance will exceed the performance of these entities.

The terms of a license agreement with President Trump is not terminable by TMTG when it may be desirable to TMTG. The license agreement does not require President Trump to use Truth Social in certain circumstances and could require TMTG to make payments to President Trump for content on TMTG+.

As further described in the section titled, “Information about TMTG,” President Trump is generally obligated to make any social media post on TruthSocial and may not make the same post on another social media site for 6 hours. Thereafter, he is free to post on any site to which he has access. Thus, TMTG has limited time to benefit from his posts and followers may not find it compelling to use TruthSocial to read his posts that quickly. In addition, he may make a post from a personal account related to political messaging, political fundraising or get-out-the-vote efforts on any social media site at any time.

With respect to TMTG+, if President Trump receives a bona fide offer to be featured in any production intended to be streamed on a different VOD service, TMTG has the right to create a substantially similar video production on terms more favorable than those offered by the other service. TMTG may be unable to create a substantially similar or production or offer more favorable terms to President Trump and the content would not be available to TMTG+ subscribers.

TMTG has entered into a license agreement with President Trump wherein neither the personal nor political conduct of President Trump, even if such conduct could negatively reflect on TMTG’s reputation or brand or be considered offensive, dishonest, illegal, immoral, or unethical, or otherwise harmful to TMTG’s brand or reputation, shall be considered a breach of the license agreement. TMTG expressly acknowledges the controversial nature of being associated with President Trump and the possibility of any associated controversies affecting TMTG adversely.

President Trump will significantly influence, or depending on the amount of redemptions, may control the Combined Entity through his stock ownership, enabling him to elect who sits on the Combined Entity’s board of directors, and potentially to block matters requiring stockholder approval, including any potential changes of control.

After giving effect to the Business Combination, President Trump owns approximately 73.3 million of the Combined Entity’s outstanding shares of common stock, representing approximately 46.8% of its voting power (assuming no redemptions and full issuance of the common stock issuable upon conversion of the Preferred Stock, but not including the contingent right to receive Earnout Shares as described more fully in the Merger Agreement). As a result, President Trump has the ability to significantly influence, and may depending on the level of redemptions may control, the outcome of all matters requiring stockholder approval, including the election and removal of the Combined Entity’s entire board of directors and any merger, consolidation or sale of

 

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all or substantially all of the Combined Entity’s assets, and the ability to control the Combined Entity’s management and affairs. This concentrated control could, among other things, discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to the Combined Entity’s businesses. If President Trump were to own more than 50% of the voting power, the Combined Entity would be a “controlled company” within the meaning of applicable Nasdaq corporate governance standards. Under these corporate governance standards, a company of which more than 50% of the voting power is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance standards, including the requirements; (1) that a majority of the Combined Entity’s board of directors consist of independent directors, (2) that the Combined Entity’s board of directors have a compensation committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities and (3) that the Combined Entity’s board of directors have a nominating and corporate governance committee that is comprised entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities. The Combined Entity may intend to take advantage of these exemptions. While TMTG has elected to not be treated as a “controlled company,” it could change that election in the future.

TMTG may be subject to greater risks than typical social media or streaming videos services because of the focus of its offerings and the involvement of President Trump. These risks include active discouragement of users, harassment of advertisers or content providers, increased risk of hacking of TMTG’s platform and increased stockholder suits.

TMTG is aware that Big Tech platforms, such as YouTube, “de-monetize” certain content because they disagree with its message. There have been numerous calls to ban or encourage advertisers to boycott content providers who express or permit views contrary to the prevailing narrative. It is likely that these same people calling for boycotts will seek to do the same for companies that may advertise on TruthSocial or provide programming for TMTG+. To the extent these calls are successful, or the mere threat of them sufficient, to prevent advertisers from appearing on TMTG’s platform or providing content to TMTG+, TMTG may not generate the revenues TMTG anticipates and the price of TMTG’s stock could likely decline.

All social media sites are subject to risks of hackers or people who try to disrupt their operations and post false or malicious information or make it seem as if innocent third persons are posting such information. Such people may also try to steal personal information about TMTG’s users. TMTG believes it will be subject to greater risks in this regard than other social media companies currently are. Accordingly, TMTG will have to spend more money to build more robust security to protect against these attacks. There can be no assurance that these efforts will be successful. Any increase of expenditures to protect against attacks will increase TMTG’s expense and thus, decrease its ability to achieve and remain profitable. In the event these attacks are successful, TMTG will have to devote resources to correct problems as well as possibly pay damages to its users for losses they suffer.

TMTG will be a Delaware corporation after giving effect to the Business Combination. As a result, TMTG’s stockholders will have certain rights under Delaware law to information and to make inquiries of TMTG’s board of directors. It is possible that people will invest in TMTG’s common stock simply with the intention to see such information and disrupt TMTG’s management and board’s attention on TMTG’s business. The costs of these matters will increase TMTG’s expenses and thus decrease TMTG’s ability to achieve profitability and remain profitable.

TMTG depends on numerous third-parties to operate successfully, and many of these third parties may not want to engage with TMTG to provide any services. This may limit TMTG’s ability to operate or raise capital.

To operate successfully, TMTG is dependent on third parties to provide services to operate successfully, such as web hosting, content monitoring and technology development. To date, several potential third-party partners have expressed an unwillingness or reluctance to work on TMTG’s products or provide services due to

 

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TMTG’s connection with President Trump. Similarly, to the extent TMTG needs to raise additional capital, TMTG will need to engage with investment bankers and investors and it is possible that some will not want to engage with TMTG for similar reasons. For example, it was widely reported that at least one of the initial investors of Digital World sold their stock rather than invest in a company associated with President Trump. There can be no assurance that TMTG will be able to develop and improve its products or raise additional capital if it is unable to engage third parties.

Risks Related to Ownership of New Digital World Common Stock

An active market for New Digital World’s securities may not develop, which would adversely affect the liquidity and price of New Digital World’s securities.

The price of New Digital World’s securities may vary significantly due to factors specific to New Digital World as well as to general market or economic conditions. Furthermore, an active trading market for New Digital World’s securities may never develop or, if developed, it may not be sustained. You may be unable to sell your securities unless a market can be established and sustained.

Nasdaq may delist New Digital World’s securities from trading on its exchange, which could limit investors’ ability to make transactions in New Digital World’s securities and subject New Digital World to additional trading restrictions.

Digital World’s securities are currently listed on Nasdaq and it is anticipated that, following the Business Combination, New Digital World’s securities will be listed on Nasdaq. However, Digital World cannot assure you that New Digital World’s securities will continue to be listed on Nasdaq in the future. In order to continue listing its securities on Nasdaq, New Digital World must maintain certain financial, distribution and stock price levels. Generally, New Digital World must maintain a minimum number of holders of its securities (generally 400 public holders). Additionally, in connection with the Business Combination, New Digital World will be required to demonstrate compliance with Nasdaq’s initial listing requirements, which are more rigorous than Nasdaq’s continued listing requirements, in order to continue to maintain the listing of our securities on Nasdaq. For instance, New Digital World’s stock price would generally be required to be at least $4.00 per share and New Digital World will be required to have a minimum of 400 public holders (with at least 50% of such round lot holders holding securities with a market value of at least $2,500) in order to remain listed on the Nasdaq Global Market. Digital World cannot assure you that New Digital World will be able to meet those initial listing requirements at that time.

If Nasdaq delists New Digital World’s securities from trading on its exchange and New Digital World is not able to list its securities on another national securities exchange, Digital World expects New Digital World’s securities could be quoted on an over-the-counter market. If this were to occur, New Digital World could face significant material adverse consequences, including:

 

   

a limited availability of market quotations for its securities;

 

   

reduced liquidity for its securities;

 

   

a determination that New Digital World’s common stock is a “penny stock” which will require brokers trading in the common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for New Digital World’s securities;

 

   

a limited amount of news and analyst coverage; and

 

   

a decreased ability to issue additional securities or obtain additional financing in the future.

 

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The market price of New Digital World’s common stock may decline as a result of the Business Combination.

The market price of New Digital World’s common stock may decline as a result of the Business Combination for a number of reasons including if:

 

   

investors react negatively to the prospects of New Digital World’s business and the prospects of the Business Combination;

 

   

the effect of the Business Combination on New Digital World’s business and prospects is not consistent with the expectations of financial or industry analysts; or

 

   

New Digital World does not achieve the perceived benefits of the Business Combination as rapidly or to the extent anticipated by financial or industry analysts.

The New Digital World common stock price may change significantly following the Merger and you could lose all or part of your investment as a result.

The trading price of New Digital World common stock is likely to be volatile. The stock market recently has experienced extreme volatility. This volatility often has been unrelated or disproportionate to the operating performance of particular companies. You may not be able to resell your shares of New Digital World common stock at an attractive price due to a number of factors such as those listed in “— Risks Related to TMTG” and the following:

 

   

results of operations that vary from the expectations of securities analysts and investors;

 

   

results of operations that vary from those New Digital World’s competitors;

 

   

changes in expectations as to New Digital World’s future financial performance, including financial estimates and investment recommendations by securities analysts and investors;

 

   

declines in the market prices of stocks generally;

 

   

strategic actions by New Digital World or its competitors;

 

   

announcements by New Digital World or its competitors of significant contracts, acquisitions, joint ventures, other strategic relationships or capital commitments;

 

   

announcements of estimates by third parties of actual or anticipated changes in the size of New Digital World’s user base or the level of user engagement;

 

   

any significant change in New Digital World’s management;

 

   

changes in general economic or market conditions or trends in New Digital World’s industry or markets;

 

   

changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to New Digital World’s business;

 

   

additional shares of New Digital World securities being sold or issued into the market by New Digital World or any of the existing stockholders or the anticipation of such sales, including if New Digital World issues shares to satisfy restricted stock unit related tax obligations or if existing stockholders sell shares into the market when applicable “lock-up” periods end;

 

   

investor perceptions of the investment opportunity associated with New Digital World common stock relative to other investment alternatives;

 

   

the public’s response to press releases or other public announcements by New Digital World or third parties, including New Digital World’s filings with the SEC;

 

   

litigation involving New Digital World, New Digital World’s industry, or both, or investigations by regulators into New Digital World’s operations or those of New Digital World’s competitors;

 

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guidance, if any, that New Digital World provides to the public, any changes in this guidance or New Digital World’s failure to meet this guidance;

 

   

the development and sustainability of an active trading market for New Digital World common stock;

 

   

actions by institutional or activist stockholders;

 

   

developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies;

 

   

changes in accounting standards, policies, guidelines, interpretations or principles; and

 

   

other events or factors, including those resulting from pandemics, natural disasters, war, acts of terrorism or responses to these events.

These broad market and industry fluctuations may adversely affect the market price of New Digital World common stock, regardless of New Digital World’s actual operating performance. In addition, price volatility may be greater if the public float and trading volume of New Digital World common stock is low.

In the past, following periods of market volatility, stockholders have instituted securities class action litigation. If New Digital World was involved in securities litigation, it could have a substantial cost and divert resources and the attention of executive management from New Digital World’s business regardless of the outcome of such litigation.

Because there are no current plans to pay cash dividends on the New Digital World common stock for the foreseeable future, you may not receive any return on investment unless you sell your New Digital World common stock at a price greater than what you paid for it.

New Digital World intends to retain future earnings, if any, for future operations, expansion and debt repayment, and there are no current plans to pay any cash dividends for the foreseeable future. The declaration, amount and payment of any future dividends on shares of New Digital World common stock will be at the sole discretion of the New Digital World board of directors. The New Digital World board of directors may take into account general and economic conditions, New Digital World’s financial condition and results of operations, New Digital World’s available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions, implications of the payment of dividends by New Digital World to its stockholders or by its subsidiaries to it and such other factors as the New Digital World board of directors may deem relevant. As a result, you may not receive any return on an investment in New Digital World common stock unless you sell your New Digital World common stock for a price greater than that which you paid for it.

New Digital World stockholders may experience dilution in the future.

The percentage of shares of New Digital World common stock owned by current stockholders may be diluted in the future because of equity issuances for acquisitions, capital market transactions or otherwise, including, without limitation, equity awards that New Digital World may grant to its directors, officers and employees, exercise of the New Digital World warrants. Such issuances may have a dilutive effect on New Digital World’s earnings per share, which could adversely affect the market price of New Digital World common stock.

If securities or industry analysts do not publish research or reports about New Digital World’s business, if they change their recommendations regarding New Digital World common stock or if New Digital World’s operating results do not meet their expectations, the New Digital World common stock price and trading volume could decline.

The trading market for New Digital World common stock will depend in part on the research and reports that securities or industry analysts publish about New Digital World or its businesses. If no securities or industry

 

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analysts commence coverage of New Digital World, the trading price for New Digital World common stock could be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover New Digital World downgrade its securities or publish unfavorable research about its businesses, or if New Digital World’s operating results do not meet analyst expectations, the trading price of New Digital World common stock would likely decline. If one or more of these analysts cease coverage of New Digital World or fail to publish reports on New Digital World regularly, demand for New Digital World common stock could decrease, which might cause the New Digital World common stock price and trading volume to decline.

Future sales, or the perception of future sales, by New Digital World or its stockholders in the public market following the Business Combination could cause the market price for New Digital World common stock to decline.

The sale of shares of New Digital World common stock in the public market, or the perception that such sales could occur, could harm the prevailing market price of shares of New Digital World common stock. These sales, or the possibility that these sales may occur, also might make it more difficult for New Digital World to sell equity securities in the future at a time and at a price that it deems appropriate.

It is anticipated that, upon the Closing, and giving effect to the PIPE and assuming immediate and full conversion of the Preferred Stock, Digital World’s public stockholders will retain an ownership interest of approximately 19.2% of the outstanding capital stock of the Combined Entity, the Sponsor will retain an ownership interest of approximately 5.1% of the outstanding capital stock of the Combined Entity and the TMTG securityholders will own approximately 56.7% of the outstanding capital stock of the Combined Entity. The foregoing ownership percentages with respect to the Combined Entity following the Business Combination exclude any outstanding Warrants and assume that (i) there are no redemptions of any shares by Digital World’s public stockholders in connection with the Business Combination, (ii) no awards are issued under the Equity Incentive Plan and (iii) no Working Capital Units or Extension Units are issued. All shares currently held by Digital World public stockholders and all of the shares issued in the Business Combination to existing TMTG securityholders will be freely tradable without registration under the Securities Act, and without restriction by persons other than New Digital World’s “affiliates” (as defined under Rule 144 under the Securities Act, (“Rule 144”)), including New Digital World’s directors, executive officers and other affiliates.

In connection with the Merger, certain existing TMTG securityholders, who are expected to own                     % shares of New Digital World common stock following the Business Combination (based on the above assumptions and TMTG’s current stockholdings), have agreed with Digital World, subject to certain exceptions, not to dispose of or hedge any of their shares of New Digital World common stock or securities convertible into or exchangeable for shares of New Digital World common stock during the period from the date of the Closing continuing through the earliest of: (i) the six-month anniversary of the Closing, (ii) the date on which the Closing price of New Digital World common stock equals or exceeds $12.00 per share for any 20 trading days within any 30 trading day period commencing at least 150 days after the Closing, and (iii) such date on which New Digital World completes a liquidation, merger, stock exchange, reorganization or other similar transaction that results in all of the New Digital World stockholders having the right to exchange their shares of New Digital World common stock for cash, securities or other property. See “The Business Combination Proposal — General Description of the Merger Agreement — Lock-up Agreements”.

In addition, the shares of New Digital World common stock reserved for future issuance under the Equity Incentive Plan will become eligible for sale in the public market once those shares are issued, subject to any applicable vesting requirements, lockup agreements and other restrictions imposed by law. A total number of shares representing 7.5% of the fully diluted, and as converted, outstanding shares of New Digital World common stock immediately following consummation of the Merger are expected to be reserved for future issuance under the Equity Incentive Plan. New Digital World is expected to file one or more registration statements on Form S-8 under the Securities Act to register shares of New Digital World common stock or

 

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securities convertible into or exchangeable for shares of New Digital World common stock issued pursuant to the Equity Incentive Plan. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market.

In the future, New Digital World may also issue its securities in connection with investments or acquisitions. The amount of shares of New Digital World common stock issued in connection with an investment or acquisition could constitute a material portion of the then-outstanding shares of New Digital World common stock. Any issuance of additional securities in connection with investments or acquisitions may result in additional dilution to New Digital World stockholders.

Digital World currently is and New Digital World will be an emerging growth company within the meaning of the Securities Act, and if New Digital World takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, this could make our securities less attractive to investors and may make it more difficult to compare our performance with other public companies.

Digital World is currently and, following the consummation of the Merger, New Digital World will be an “emerging growth company” within the meaning of the Securities Act, as modified by the JOBS Act. New Digital World may continue to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As a result, New Digital World stockholders may not have access to certain information they may deem important. We cannot predict whether investors will find securities issued by New Digital World less attractive because New Digital World will rely on these exemptions. If some investors find those securities less attractive as a result of its reliance on these exemptions, the trading prices of New Digital World’s securities may be lower than they otherwise would be, there may be a less active trading market for New Digital World’s securities and the trading prices of New Digital World’s securities may be more volatile.

Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such election to opt out is irrevocable. Digital World has elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, New Digital World, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of New Digital World’s financial statements with another public company that is neither an emerging growth company nor an emerging growth company that has opted out of using the extended transition period difficult or impossible because of the potential differences in accountant standards used.

New Digital World will remain an emerging growth company until the earliest of: (i) the last day of the fiscal year following the fifth anniversary of the closing of the Digital World IPO, (ii) the last day of the fiscal year in which New Digital World has total annual gross revenue of at least $1.07 billion; (iii) the last day of the fiscal year in which New Digital World is deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of New Digital World common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year; or (iv) the date on which New Digital World has issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

 

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New Digital World may redeem unexpired Public Warrants prior to their exercise at a time that is disadvantageous for Digital World warrantholders.

New Digital World will have the ability to redeem outstanding Public Warrants at any time after they become exercisable and prior to their expiration, at a price of $0.01 per warrant, provided that the last reported sales price of New Digital World common stock equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within a 30 trading-day period ending on the third trading day prior to the date New Digital World sends the notice of redemption to the warrant holders. If and when the Public Warrants become redeemable by New Digital World, New Digital World may exercise its redemption right if there is a current registration statement in effect with respect to the shares of New Digital World common stock underlying such warrants. Redemption of the outstanding Public Warrants could force you to: (i) exercise your warrants and pay the related exercise price at a time when it may be disadvantageous for you to do so; (ii) sell your warrants at the then-current market price when you might otherwise wish to hold your warrants; or (iii) accept the nominal redemption price which, at the time the outstanding Public Warrants are called for redemption, is likely to be substantially less than the market value of your warrants. None of the Placement Warrants (or if issued, any warrants underlying the Working Capital Units or Extension Units) will be redeemable by New Digital World for cash so long as they are held by the Sponsor or its permitted transferees.

Risks Related to Redemption

The ability to execute Digital World and TMTG’s strategic plan could be negatively impacted to the extent a significant number of stockholders choose to redeem their shares in connection with the Business Combination.

In the event the aggregate cash consideration Digital World would be required to pay for all of its public shares that are validly submitted for redemption plus any amount required to satisfy cash conditions pursuant to the terms of the Merger Agreement exceeds the aggregate amount of cash available to Digital World, Digital World may be required to increase the financial leverage Digital World and TMTG’s business would have to support. This may negatively impact Digital World and TMTG’s ability to execute on their future strategic plan.

There is no guarantee that a Digital World public stockholder’s decision whether to redeem its shares of Digital World common stock for a pro rata portion of the Trust Account will put such stockholder in a better future economic position.

We cannot assure you as to the price at which a public stockholder may be able to sell the shares of New Digital World common stock in the future following the completion of the Merger. Certain events following the consummation of any business combination, including the Merger, may cause an increase in the New Digital World stock price, and may result in a lower value realized now than a Digital World stockholder might realize in the future had the stockholder not elected to redeem such stockholder’s public shares. Similarly, if a Digital World public stockholder does not redeem his, her or its shares, such stockholder will bear the risk of ownership of New Digital World common stock after the consummation of the Merger, and there can be no assurance that a stockholder can sell his, her or its shares of New Digital World common stock in the future for a greater amount than the redemption price set forth in this proxy statement/prospectus. A Digital World public stockholder should consult his, her or its own tax or financial advisor for assistance on how this may affect its individual situation.

If Digital World public stockholders fail to comply with the redemption requirements specified in this proxy statement/prospectus, they will not be entitled to redeem their public shares for a pro rata portion of the funds held in the Trust Account.

Digital World intends to comply with the U.S. federal proxy rules in conducting redemptions in connection with the Merger. However, despite Digital World’s compliance with these rules, if a Digital World stockholder fails to receive Digital World’s proxy materials, such stockholder may not become aware of the opportunity to redeem its

 

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shares of Digital World common stock. In addition, this proxy statement/prospectus provides the various procedures that must be complied with in order to validly tender or redeem public shares. In the event that a public stockholder fails to comply with these or any other procedures, its public shares may not be redeemed.

In order to exercise their redemption rights, public stockholders are required to deliver their public shares, either physically or electronically using the Depository Trust Company’s DWAC System, to Digital World’s transfer agent prior to the vote at the Digital World Special Meeting. If a public stockholder properly seeks redemption as described in this proxy statement/prospectus and the Business Combination is consummated, Digital World will redeem these public shares for a pro rata portion of the funds deposited in the Trust Account and the public stockholder will no longer own such public shares following the Merger. See the section entitled “Digital World Special Meeting of Stockholders — Redemption Rights” for additional information on how to exercise your redemption rights.

If you or a “group” of Digital World stockholders of which you are a part is deemed to hold an aggregate of more than 15% of the public shares, you (or, if a member of such a group, all of the members of such group in the aggregate) will lose the ability to redeem all such public shares in excess of 15% of the public shares.

A public stockholder, together with any of his, her or its affiliates or any other person with whom it is acting in concert or as a “group” (as defined in Section 13(d)(3) of the Exchange Act), will be restricted from redeeming in the aggregate his, her or its public shares or, if part of such a group, the group’s public shares, in excess of 15% of the public shares, without the prior consent of Digital World. However, Digital World stockholders’ ability to vote all of their public shares (including such excess shares) for or against the Business Combination Proposal is not restricted by this limitation on redemptions. Your inability to redeem any such excess public shares could result in you suffering a material loss on your investment in Digital World if you sell such excess public shares in open market transactions. Digital World cannot assure you that the value of such excess public shares will appreciate over time following the Business Combination or that the market price of the public shares will exceed the per share redemption price.

The Sponsor, directors or officers or their affiliates may enter into certain non-redemption arrangements with public stockholders, which may influence a vote on a proposed Business Combination and the other proposals described in this proxy statement/prospectus and reduce the public “float” of Digital World common stock.

The Sponsor, directors or officers or their affiliates may enter into certain non-redemption arrangements with public stockholders either prior to or following the completion of the Business Combination, although they are under no obligation to do so. Such an arrangement may include a contractual acknowledgement that such stockholder, although still the record holder of the shares is no longer the beneficial owner thereof and therefore agrees not to exercise its redemption rights. The purpose of such purchases could be to vote such shares in favor of the Business Combination and thereby increase the likelihood of obtaining stockholder approval of the Business Combination or to satisfy closing conditions in the Merger Agreement regarding required amounts of cash or cash equivalents that Digital World has from any source equal or exceeds certain thresholds where it appears that such requirements would otherwise not be met. This may result in the completion of the Business Combination that may not otherwise have been possible. In addition, if such purchases are made, the public “float” of Digital World common stock and the number of beneficial holders of its securities may be reduced, possibly making it difficult to obtain or maintain the quotation, listing or trading of Digital World securities on the Nasdaq or another national securities exchange or reducing the liquidity of the trading market for its common stock.

 

118


UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

Defined terms included below shall have the same meaning as terms defined and included elsewhere in this this proxy statement/prospectus.

The following unaudited pro forma condensed combined financial statements of Digital World present the combination of the historical financial information of Digital World and TMTG adjusted to give effect to the Business Combination. The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X.

The unaudited pro forma condensed combined balance sheet as of December 31, 2021 combines the historical balance sheet of Digital World and the historical balance sheet of TMTG as of December 31, 2021, on a pro forma basis as if the Business Combination and related transactions, summarized below, had been consummated on December 31, 2021.

The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2021 combine the historical statements of operations of Digital World and TMTG for such period on a pro forma basis as if the Business Combination and related transactions had been consummated on January 1, 2021, the beginning of the period presented.

The unaudited pro forma condensed combined financial statements have been developed from and should be read in conjunction with:

 

   

the accompanying notes to the unaudited pro forma condensed combined financial statements;

 

   

the historical audited financial statements of Digital World as of and for the year ended December 31, 2021 and the related notes thereto, included elsewhere in this proxy statement/prospectus;

 

   

the historical audited financial statements of TMTG as of December 31, 2021 and for the period from February 8, 2021 (inception) through December 31, 2021 and the related notes thereto, included elsewhere in this proxy statement/prospectus; and

 

   

the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Digital World,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations of TMTG,” and other financial information relating to Digital World and TMTG included elsewhere in this proxy statement/prospectus, including the Merger Agreement and the description of certain terms thereof set forth under “The Business Combination.

The unaudited pro forma condensed combined financial information has been presented for illustrative purposes only and does not necessarily reflect what the Combined Entity’s financial condition or results of operations would have been had the Business Combination, convertible notes issuance and private placement occurred on the dates indicated. Further, the unaudited pro forma condensed combined financial information also may not be useful in predicting the future financial condition and results of operations of the Combined Entity. The actual financial position and results of operations may differ significantly from the pro forma amounts reflected herein due to a variety of factors. The unaudited transaction accounting adjustments represent management’s estimates based on information available as of the date of this unaudited pro forma condensed combined financial information and are subject to change as additional information becomes available and analyses are performed. Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The Combined Entity believes that its assumptions and methodologies provide a reasonable basis for presenting all of the significant effects of the Business Combination, convertible notes issuance and private placement based on information available to management at this time and that the transaction accounting adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial information.

 

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On October 20, 2021, Digital World entered into the Merger Agreement with Merger Sub, TMTG, ARC Global Investments II, LLC and TMTG’s General Counsel, as amended on May 11, 2022. Pursuant to the Merger Agreement, and subject to the terms and conditions set forth therein, upon the Closing, Merger Sub will merge with and into TMTG, with TMTG surviving as a wholly-owned subsidiary of Digital World, and with TMTG’s equity holders receiving 85,784,314 shares of the New Digital World common stock at a value of $10.20 per share for total consideration of $875,000,000, plus up to an additional 3,163,709 shares of New Digital World Common Stock to be issued upon conversion of convertible notes outstanding as of December 31, 2021, subject to certain adjustments and earnout provisions. Upon the closing of the Business Combination, it is anticipated that Digital World will change its name to Trump Media & Technology Group Corp.

Pursuant to the existing Digital World Charter, public stockholders are being offered the opportunity to redeem, upon the closing of the merger, shares of Digital World Class A common stock then held by them for cash equal to their pro rata share of the aggregate amount on deposit in the Trust Account (as of two business days prior to the Closing). The unaudited pro forma condensed combined information contained herein assumes that Digital World stockholders approve the Business Combination. Digital World’s public stockholders may elect to redeem their Class A common stock for cash even if they approve the Business Combination. Digital World cannot predict how many of its stockholders will exercise their right to have their shares redeemed for cash. As a result, for illustrative purposes, the unaudited pro forma condensed combined financial information has been prepared assuming two alternative levels of additional redemptions of Digital Class A common stock:

 

   

Assuming Minimum Additional Redemptions (“Minimum Redemption”) — this scenario assumes that no shares of Digital World Class A common stock are redeemed; and

 

   

Assuming Maximum Redemptions (“Maximum Redemption”) — This scenario assumes additional redemption of 28.8 million shares of Digital World Class A common stock, for aggregate payment of approximately $273.3 million from the Trust Account), so that Digital World retains at least $5,000,001 in net tangible assets immediately prior to or upon the consummation of the Business Combination (after giving effect to payments of all unpaid expenses, Digital World’s liabilities and redemptions by Digital World’s public stockholders and excluding TMTG’s closing cash and the proceeds of the private placement).

 

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The public stockholder redemptions are expected to be within the parameters described by the above two scenarios. However, there can be no assurance regarding which scenario will be closest to the actual results. Under both scenarios, TMTG is considered the accounting acquirer, as further discussed in Note 2, Basis of Presentation, of the unaudited pro forma condensed combined financial information.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

AS OF DECEMBER 31, 2021

(in thousands)

 

     TMTG
(Historical)
     Digital
(Historical)
     Pro Forma
Adjustments
Assuming
Minimum
Redemption
           Pro Forma
Combined
Assuming
Minimum
Redemption
     Pro Forma
Adjustments
Assuming
Maximum
Redemption
           Pro Forma
Combined
Assuming
Maximum
Redemption
 

ASSETS

                     

Current assets:

                     

Cash and cash equivalents

   $ 18,735      $ 328      $ 293,257       A      $ 1,292,357      $ (273,294     J      $ 1,019,063  
           (10,063     B             
           (9,900     C             
           1,000,000       F             

Related party receivable

     23                23             23  

Prepaid expenses and other current assets

     431        241             672             672  
                     
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

 

Total current assets

     19,189        569        1,273,294          1,293,052      $ (273,294        1,019,758  
                     

Non-current assets:

                     

Prepaid expenses

        165             165             165  

Cash and marketable securities held in Trust Account

        293,257        (293,257     A        —               —    

Property and equipment, net

     62                62             62  
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

 

Total non-current assets

     62        293,422        (293,257        227        —            227  
  

 

 

    

 

 

    

 

 

      

 

 

    

 

 

      

 

 

 

TOTAL ASSETS

   $ 19,251      $ 293,991      $ 980,037        $
1,293,279
 
   $ (273,294      $ 1,019,985