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Mr. Musk’s plan for a Twitter takeover adds to the problems facing the former president’s nascent Truth Social network.
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Matthew GoldsteinKenneth P. Vogel and
Truth Social is slow and clunky. Its audience participation remains low. Two top executives have left. And the merger that could bring $1.3 billion in desperately needed cash to former President Donald J. Trump’s social media project seems far from completion.
And now Truth Social’s very reason for being appears under threat.
Elon Musk’s plan for a potential hostile takeover of Twitter is the latest challenge for Trump Media & Technology Group’s flagship Truth Social app, which Mr. Trump has positioned as Twitter’s freewheeling conservative counterpart.
Mr. Musk said Thursday that he had obtained $46.5 billion in financing for his takeover bid and has suggested he would loosen Twitter moderation policies that he has chafed under — and that famously led the service to bar Mr. Trump for inciting violence over the outcome of the 2020 presidential election.
Although Mr. Musk has not said if he would allow Mr. Trump to return to the platform if his bid succeeded, his ideas for easing Twitter’s rules would further sap the appeal of Mr. Trump’s beleaguered start-up as it faces a regulatory investigation that could decide its future.
Karen Freberg, a professor of strategic communications at the University of Louisville, said Truth Social might have missed its chance.
“Had Truth Social had everything up and running, it could have brought people in and had potential time to grow the platform,” she said. “What’s happening with Twitter is that it’s gotten the media attention and spotlight, and Elon Musk is now utilizing his influence.”
Trump Media declined to comment on Mr. Musk’s Twitter bid. Liz Harrington, a spokeswoman for Mr. Trump, pointed to a recent interview with Americano Media in which the former president said he “probably wouldn’t rejoin Twitter if he could.”
Trump Media and Truth Social were facing significant challenges even without a competitor that could become more alluring to its prospective user base.
The clock is ticking on Trump Media’s planned merger with Digital World Acquisition, a cash-rich blank check company that raised nearly $300 million in an initial public offering. If the companies do not complete their merger by Sept. 8 or agree to extend the deadline, Trump Media is in danger of losing out on that money. More significant, investors in a $1 billion private placement to support the merger can pull out if the deal is not completed by Sept. 20.
Five months is precious little time to complete the merger while also dealing with an investigation by the Securities and Exchange Commission, the regulator that must sign off on the deal.
Digital World disclosed the investigation just a few weeks after announcing the merger plans in October. The regulator is looking into unusual trading activity in the company’s shares ahead of the announcement and seeking information about potential communications between representatives of the two companies before Digital World, a special purpose acquisition company, went public in September.
The S.E.C. has requested numerous emails and text messages from individuals involved in the merger talks, said two people briefed on the matter but not authorized to speak publicly.
The investigation has fueled growing skepticism about the deal’s prospects. Kerrisdale Capital, a prominent short-selling hedge fund — a firm that specializes in betting on a stock’s decline — issued a 27-page report on Wednesday that predicted the S.E.C. would never sign off on the deal.
Investor enthusiasm has also dampened: Shares of Digital World fell 17 percent this week, even after an 8 percent rally on Friday. The stock closed at $41, still less than half its $97.54 peak on March 4.
Patrick Orlando, the chief executive officer of Digital World, did not respond to requests for comment. Digital World’s annual report, filed last week, did not mention the S.E.C. investigation and provided little information on the status of the merger.
Some investors in the private placement — which mainly included hedge funds and wealthy individuals — are increasingly frustrated at the lack of information about when the deal could close, said three people briefed on the matter who did not want to speak publicly because the deal was still pending. Seeking more information, some investors have reached out to representatives for the two companies and bankers involved in the deal, but none was provided, the people said.
The merger has moved slowly since it was announced six months ago. That’s about the average length of time that SPACs like Digital World are taking to go from an announcement to a completed merger this year, according to Dealogic, a deal tracking service.
Digital World has yet to file a critical registration document, called an S-4, which is a milestone in any merger or acquisition. An S-4 would typically be filed within two months of a deal announcement, said Mike Stegemoller, a finance professor at Baylor University who studies SPACs, a kind of shell company that goes public with the intention of merging with a private company. Digital World’s annual report promised the S-4 would be filed “as promptly as practicable.”
Regulators are scrutinizing the deal because a SPAC is not supposed to go public with a potential deal in its sights. The New York Times previously reported that another SPAC that Mr. Orlando leads, Benessere Capital Acquisition, was the initial intended merger partner for Trump Media, but those negotiations broke down when some board members balked at doing a deal with a company led by Mr. Trump. In a recent filing, Benessere said negotiations with an unnamed “media and technology company” ended in August, not long before Digital World went public.
Digital World said in its annual report that it would “continue to pursue a business combination” with another company if the Trump Media deal fell through.
Trump Media would face a murkier future. After a flurry of downloads when Truth Social was launched, interest has dropped sharply. Sensor Tower, an app insights company, said the app was downloaded an estimated 41,000 times in the last full week of March, down 95 percent from the same period the previous month.
Truth Social, which is available only on Apple devices, has 1.3 million installs, Sensor Tower estimated. By comparison, Twitter has more than 200 million active users.
The offer. Elon Musk, the world’s wealthiest man, made an unsolicited bid worth more than $43 billion for the social media company. Mr. Musk said that he wanted to make Twitter a private company and that he wanted people to be able to speak more freely on the service.
Twitter’s response. The social media company countered the offer with a defense mechanism known as a “poison pill.” This well-worn corporate tactic makes a company less palatable to a potential acquirer by making it more expensive for them to buy shares above a certain threshold.
What’s next? On April 21, Mr. Musk said he had received commitments worth $46.5 billion to finance his bid. He added that he was considering pursuing a hostile takeover with a move, known as a tender offer, that would see him take his offer directly to Twitter shareholders.
The sagging engagement extends to Mr. Trump, who only recently hit the one million follower mark, a sliver of the 89 million he once had on Twitter. He has published just one post on Truth Social, a February message telling his followers to “Get Ready!”
The platform got off to a glitchy start with error messages and a long waiting list. Three people familiar with Truth Social said there had been a scramble to prepare it for launch amid frustrations with the performance of some of the back-end technology to support the app.
Two top tech executives working on Truth Social, Josh Adams and Billy Boozer, left the company last month, Reuters first reported. Both were said to be dissatisfied with elements of the technology behind the platform, according to five people briefed on the matter. Neither responded to repeated request for comment.
Their departures add to the mystery of the company’s internal operations.
In a November presentation for investors, Trump Media provided the full names for only a handful of employees. Mr. Adams, the chief technology officer, and Mr. Boozer, the chief product officer, were described by their titles and as “Josh A.” and “Billy B.” The company’s chief financial officer, Phillip Juhan, was not identified at all.
Mr. Juhan and Devin Nunes, the former California Republican congressman hired by Mr. Trump in December to serve as Trump Media’s chief executive, are listed as directors on a filing in Georgia, where Trump Media incorporated itself last month. Trump Media is also incorporated in Delaware but has listed Mr. Trump’s Mar-a-Largo club in Florida as its corporate headquarters.
Mr. Nunes has refused numerous interview requests. On Fox Business Network’s “Mornings With Maria” this month, he told the host, Maria Bartiromo, that Twitter was a “ghost town.
Twitter, he said, “desperately” needed Mr. Musk.
Maggie Haberman contributed reporting.


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