Just days after Donald Trump left the White House, he was approached with a hint by two former contestants on his reality show “The Apprentice”. Wes Moss and Andy Litinsky wanted to create a conservative media giant.
Trump was excited about the idea. But he had to figure out how to pay for it.
This month, the former president found his way. He agreed to combine his social media venture with a so-called special purpose acquisition company, or SPAC. As a result, Trump – largely excluded from the major financial industry due to his history of bankruptcies and loan defaults – has provided nearly $ 300 million in funding for his new deal.
To get his business done, Trump ventured into a messy and sometimes shady corner of Wall Street, where he worked with unlikely characters: former “apprentice” contestants, a small Chinese investment firm, and a little-known Miami banker named Patrick Orlando.
Orlando has been discussing the deal with Trump since at least March, according to people familiar with the talks and the investor’s confidential presentation, reviewed by The New York Times. That was long before his SPAC, the Digital World Acquisition, debuted on the Nasdaq stock exchange last month. In doing so, Orlando’s SPAC may have bypassed securities laws and stock exchange regulations, lawyers say.
SPAC sells its shares to investors through an initial public offering or IPO, and then finds a private company to merge with. Because SPACs are empty vessels, stock exchanges allow them to list their shares without disclosing much financial information. But this creates opportunities for SPACs to serve as backdoor vehicles for businesses to go public without being subject to the same investor scrutiny as they would at traditional listing. To prevent this, SPACs did not have a planned merger at the time of their IPO.
Lawyers and industry officials said talks between Orlando and Trump or their associates could consequently attract the Securities and Exchange Commission.
Another issue is that Digital World securities documents repeatedly state that the company and its executives did not engage in any “substantive discussions, directly or indirectly,” with the target company – even though Orlando was discussing with Trump.
Given the politically charged nature of the deal with Trump, securities attorneys said the lack of digital world disclosure about those talks could be considered a waiver of “essential information.”
“Financial markets are based on trust,” said Mike Stegemoller, a finance professor at Baylor University who studies SPAC. “If these revelations are not true, no one wants to participate in markets that are not fair.”
Trump Media and Technology Group attorneys did not respond to requests for comment. A Trump spokesman forwarded questions to a company whose representatives, including Litinsky and Moss, did not respond to requests for comment.
In January, Litinsky, better known as Andy Dean, and Moss – both who appeared in the second season of the series “Apprentice” in 2004 and are now radio presenters – presented themselves to Trump to “create a conservative media powerhouse to compete with liberal media and fought against ‘big tech’ Silicon Valley companies, ”according to a description of their plan in a slide show reviewed by the Times.
SPACs have been hot on Wall Street as investors have raised tens of billions of dollars over the past year. Trump and former “apprentice” contestants agreed to form the Trump Media and Technology Group and then find a SPAC to merge with, transforming their new business into a public marketing company and gaining access to its money.
Orlando was part of SPAC’s recent crop of entrepreneurs.
Orlando, a former Deutsche Bank derivative trader and CEO of a sugar trader, was better known for his role as a spokesman for his family in the horrific murder. In December 2010, his half-sister Sylvie Cachay was found strangled and drowned in a bathtub at the Soho House Club in New York City, Manhattan. Tabloids multiplied when her boyfriend, the son of an Oscar-winning songwriter, was charged and later convicted of murder. Orlando, then 38, spoke with prosecutors and the media on behalf of his family.
It’s not clear how Orlando initially connected with Trump, but according to the person who spent time with them, the two Florida men enjoyed a strong personal relationship. When they began participating in the winter of 2021, Orlando already had three SPACs that traded on U.S. stock exchanges.
One of them, the Benessere Capital Acquisition, went public on Jan. 7 – the day after Trump supporters were expelled from the Capitol – and raised about $ 100 million. Orlando created Benessere with the help of a Shanghai-based company called ARC Capital, which specializes in helping Chinese companies listed on U.S. stock exchanges. The ARC began funding Benessere.
On February 8, Trump Media was included in Delaware.
By March, Orlando and Trump were discussing the merger of Trump Media and Benessere, say people who are familiar with the talks and have not been authorized to discuss it publicly. The investor’s presentation of the planned deal envisioned a joint venture to offer a $ 15 billion social media app, movies, events and eventually various technology services and competing technology giants such as Netflix and cloud departments Amazon and Google. .
At one point, Benessera’s appeal as a means of financing Trump’s venture faded, in part because his war chest worth about $ 100 million was considered inadequate, says a person familiar with the matter. (Benessere is still looking for a company to buy.)
But Orlando had another, larger SPAC preparing to take off. In May, Digital World announced plans for an IPO. Like Benessere, Digital World was created with the help of ARC.
By the summer, people associated with Trump Media had signaled in talks with Wall Street financiers that they were approaching a merger deal with SPAC, say people familiar with those talks.
In early July, Phillip Juhan, a former financial analyst who was also a CEO at a bankrupt fitness company, introduced himself to people as Trump Media’s chief financial officer. He said the company was in an “exclusive deal” with SPAC, says one of the people.
It is not clear whether Juhan meant the Digital World. (He declined to comment.) If Digital World and Trump Media had agreed at the time, this would have been contrary to public statements by the SPAC and would very likely have violated regulations.
Shortly after Juhan mentioned Trump Media’s agreement with SPAC, Digital World said it hoped to raise nearly $ 350 million from investors. In August, SPAC revealed that it had merged 11 reputable hedge funds and other large investment firms such as DE Shaw, JPMorgan Chase’s Highbridge Capital and Saba Capital to serve as “anchors” or major investors in the initial offering.
“We have not chosen any specific business merger objective and we have not, nor anyone on our behalf, initiated substantive discussions, directly or indirectly, with any business merger objective,” he said in the digital world in prospectuses filed with the SEC in May, July, August and September. Digital World said it is likely to focus on companies in technology or financial services.
Securities attorneys said any talks between the Orlando and Trump team at any time before the September IPO could mean an indirect discussion of a possible deal, so they should be disclosed.
“The prospectus generally denies that any talks would take place,” said Usha Rodrigues, a professor at the University of Georgia Law School and one of the leading academic experts for SPAC. “If they were actually involved in the discussions at the time of the prospectus, this raises questions about a possible securities breach.”
Some bankers have said they disagree with that explanation. They claimed that Orlando, who was discussing the deal between Benessere and Trump Media, was not the same as him when he was discussing the deal on behalf of Digital World. As a result, Digital World was not required to disclose Orlando’s previous conversations.
The SEC has begun to monitor more closely the timing of agreement negotiations, as have investors in the SPAC.
Last summer, the applicants filed a lawsuit in federal court against SPAC and the company that acquired it. Plaintiffs argued that “it is very likely that the transaction was pre-arranged or at least prepared in advance,” given how quickly SPAC, Netfin Acquisition, entered into exclusive talks with the target company, Triterras Fintech. They also pointed out the long-standing relations between the leaders in both companies. The lawsuit is pending.
Trump initially expected to announce his new social media company in August, a person familiar with the time said. But plans were postponed after Trump’s son Donald Trump Jr. expressed reservations about a deal on the digital world, people familiar with the negotiations say.
On August 3, Orlando wrote to the SEC asking for permission to accelerate IPO Digital World for this month, only to withdraw the request two days later. When SPAC finally went public on Sept. 8 and raised $ 293 million, Digital World said it still hadn’t defined a merger goal.
Less than three weeks later, on Sept. 27, Orlando went to Mar-a-Lago, Trump’s private club in Florida, to sign a “letter of intent” – the initial formal step toward merging Digital World and Trump Media, the real person who knows the event. For the new SPAC, this was an extremely rapid turnaround; most SPACs need at least a year to find a goal and merge with it.
Orlando returned to Mar-a-Lago on Oct. 20, where he and Trump signed the final documentation under the chandeliers in the Golden Ball Hall, the participant says. Among those present were Donald Trump Jr. and former “apprentice” contestants, Moss and Litinsky.
After the IPO, shares of Digital World rose. They fell this week. At least two of the anchor investors, DE Shaw and Saba Capital, sold much of their shares after Trump’s deal came to light. Another reputable investor, Iceberg Research, has announced that it is betting against the stock.
Nevertheless, shares of Digital World remain about seven times higher than before the Trump deal. At least on paper, the company is worth more than $ 2 billion.
On Tuesday, as he boarded the plane, Orlando didn’t want to talk much about how the deal came about. “It was wild,” he said.
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