Judge rules Trump Media breached stock deal with early investors

Trump media violated an agreement with an investor that helped the company go public and must pay the investor a large chunk of its stock, a judge has ruled.

Monday's Delaware Chancery Court order comes just three days before investors, ARC Global and other insiders — including majority-owner Donald Trump — are free to begin selling their shares in the company behind Truth Social.

If those insiders choose to cash out their stock, they could be in line for a big payday. But they could tank investor confidence and erode the value of Trump media, which has already lost billions of dollars amid the months-long stock slump.

The judge in the Delaware case, Vice Chancellor Laurie Will, determined that the blank-check firm Digital World Acquisition Corp., or DWAC, undervalued the amount of stock it owed to ARC Global, as part of the merger that took Trump Media public in March.

But Will, in his 44-page judgment, also found the stock-conversion ratio proposed by the ARC to be too high. And he rejected several other claims presented by both ARC and DWAC as “meritless” deviations.

ARC bought Class B shares of DWAC, a special purpose vehicle that intends to merge with another business and go public.

After DWAC merged with Trump Media, those Class B shares were supposed to automatically convert into Class A stock at a 1:1 ratio. But since the company issued more Class A shares after going public, a different stock-conversion ratio is applied.

DWAC argued that the ratio is 1.3481 to 1 ARC said it should be 1.8178 to 1 will set the ratio between the two as 1.4911 to 1

“ARC is entitled to receive 8,186,345 Class A shares in conversion for its 5,490,000 Class B shares,” Will wrote in a separate order.

He directed the parties to work with an escrow agent to secure the release [of] appropriate number of shares to satisfy ARC's conversion rights” so that the investor “can freely sell or transfer those shares after the expiration of the contractual lock-up period.”

The lock-up agreement, which prevented Trump and other company insiders from selling their shares for about six months after they began trading on Nasdaq as DJT, expired Thursday.

The company still boasts a market capitalization of more than $3.3 billion, even as its latest quarterly earnings report showed a multimillion-dollar net loss for little revenue.

Analysts see personal investment in Trump media as a proxy for supporting the Republican presidential nominee and betting on his political fortunes.

Trump owns 114,750,000 shares of the company's stock, or about 57%. That stake was worth about $2 billion as of midday Tuesday, or about half of Trump's on-paper net worth as calculated by Forbes.

But Trump said last week that he has “no intention of selling.”

The announcement sent DJT shares soaring.

Trump Media has been embroiled in several other lawsuits with ARC and its founder Patrick Orlando and others involved in mass integration.

In a Florida lawsuit, Trump Media has warned that ARC and another investment vehicle, United Atlantic Ventures, plan an “imminent sale” of more than 18 million DJT shares after the lock-up is lifted.

In a filing Monday on the same case, the Trump media asked for an “urgent” court hearing.