(Bloomberg) -- The former head of the firm that took Donald Trump’s social media company public was awarded about 800,000 more shares of Trump Media & Technology Group Corp. by a Delaware court, two months after federal regulators accused him of misleading investors.
Patrick Orlando, who left his leadership roles at Digital World Acquisition Corp. (DWAC) in early 2023 and sued it this year, is entitled to almost 8.2 million class A shares rather than the 7.4 million or so he was allotted earlier, Delaware Chancery Court Judge Lori Will decided.
Will found that the special purpose acquisition company, or SPAC, which brought Trump’s Truth Social platform to the stock market, had used the wrong stock conversion ratio. For Orlando and his company Arc Global Investments II, the difference is a potential windfall of about $13 million at the stock’s current price. It was a tempered win — he had asked the court for an additional 2.6 million shares.
The judge’s decision doesn’t appear to affect the former president’s shareholding of about 60% in the media company. With Trump Media stock trading down 3.7% to $16.64 at 1:49 p.m. in New York, that 115-million-share stake is currently valued at roughly $1.91 billion.
“What should have been a straightforward exercise in contract interpretation and math was obscured by the parties’ injection of other issues,” Will said in her ruling. “ARC claims the members of DWAC’s board of directors calculated the conversion ratio and made related disclosures in bad faith out of personal animus for ARC’s founder Patrick Orlando.”
The judge said DWAC in turn raised defenses “concerning unrelated and purported misconduct by Orlando” — and that she rejected it all as “diversions.”
Orlando and insiders including Trump and Trump Media co-founders Andy Litinsky and Wes Moss may be able to sell shares for the first time as soon as Thursday evening, when restrictions preventing such sales are expected to be lifted. That could unlock roughly $135 million in paper profits for Orlando, though that number was closer to $500 million when the shares peaked. Trump has said he would be holding on to his shares.
Trump Media, which owns Truth Social, has erased two-thirds of its value in the past four months as investors positioned themselves ahead of the lockup expiration. Trump has done little to inspire investors to back the company that trades under his initials, returning to Elon Musk’s X social media platform last month and pushing things like nonfungible tokens.
Long Road
The decision is the latest twist in the legal drama over Trump’s social media company.
The deal to take Trump Media public was delayed for years after the US Justice Department and Securities and Exchange Commission launched investigations — delays that DWAC says cost it more than $100 million. Last year it agreed to pay $18 million to settle claims by the SEC that the SPAC misled investors about its plans. And in mid-July the SEC made similar claims against Orlando himself.
Neither Orlando nor his lawyers have responded to requests for comment on the SEC suit. Trump himself wasn’t accused of wrongdoing by the agency in the prior case against the company.
In yet another case, two founders of the media company claim Trump unlawfully sought to massively dilute their stake to “take the lion’s share” for himself. He has denied wrongdoing.
A SPAC lists shares and then finds a company to merge with, taking it public. If it doesn’t find such a company, it’s supposed to return the funds it raised to its investors.
Volatile Shares
Trump Media’s shares have been volatile ever since they began trading in March, two and a half years after the deal was announced in October 2021. They gained 16% in their first day on the Nasdaq stock market as swaths of retail traders touted the company across social media platforms including Reddit, X and Truth Social itself.
The shares tumbled to $22.55 three weeks later as Trump’s fortunes wavered and, just this year, spiked as much as 50% with his defiant reaction to the failed assassination attempt at a mid-July campaign rally in Pennsylvania. Trump Media, which was worth nearly $10 billion in mid-May, has fallen by about two-thirds since its market capitalization peaked and is now worth roughly $3.34 billion.
The highs contrast with the financial performance of Trump Media, which brought in less than $1 million in revenue in the three months to June 30 and posted a net loss of $16.4 million.
If it weathers the storms of politics and the markets, Trump’s shareholding could be a financial lifeline. The Republican nominee in this year’s presidential race faces hundreds of millions of dollars in legal judgments after he lost New York state’s case against him over fraudulent asset valuations and a pair of lawsuits by writer E. Jean Carroll over sexual abuse and defamation. He also has legal bills for his defense against several criminal cases.
Fight Over Ratio
Orlando, a former Deutsche Bank AG derivatives trader who launched the Benessere Capital SPAC, argued that Arc should have received 1.78 class A shares for each class B share it held. DWAC said it used the correct ratio, 1.34. The shares in question were placed in an escrow account during the dispute.
“The escrowed shares would either go to the SPAC organizers or Arc, so either way they should not affect Donald Trump’s share of Trump Media,” said Usha Rodrigues, a professor of corporate law at the University of Georgia School of Law.
The case is Arc Global Investments II v. Digital World Acquisition Corp., 2024-0186, Delaware Court of Chancery (Wilmington).
(Updates with details, context and background throughout, starting in third paragraph.)