By Tom Hals
WILMINGTON, Delaware (Reuters) – Trump Media & Technology Group Corp breached an agreement with Patrick Orlando’s ARC Global and is required to deliver a larger share of the company’s stock to the group, a Delaware judge said in a ruling published on Tuesday.
Vice Chancellor Lori Will found after a one-day trial that the blank-check company that merged with Trump Media and took it public breached its contract with the ARC investment vehicle. As a result, ARC was shorted in Trump Media (TMTG) stock, Will said.
However, Will ruled against ARC, alleging that the directors of blank-check company Digital World Acquisition Corp. breached their fiduciary duty to ARC.
TMTG and Orlando did not immediately respond to requests for comment.
Shares of TMTG fell 4.2% to $16.54 on Tuesday morning.
Orlando was CEO of DWAC when the company entered into a merger agreement with TMTG, but he was fired before the deal was completed this year and TMTG became a publicly traded company.
ARC filed a lawsuit earlier this year alleging deficiencies in shares of a listed TMTG.
ARC owned Class B shares in DWAC, which would convert into Class A shares upon completion of the TMTG deal.
ARC wanted a conversion ratio of 1.8178 for each Class B share, while TMTG argued that the ratio should be 1.3481. Will agreed to 1.4911.
“What should have been a simple exercise in contract interpretation and mathematics was overshadowed by the parties’ addition of other issues,” Will said in her judgment.
A lock-up period for ARC and Trump to sell their shares expires Thursday, according to Will. Trump said last week he would not sell his shares, sending TMTG shares higher on Friday.
Orlando was charged with securities fraud by the Securities and Exchange Commission in July for failing to disclose DWAC’s initial public offering that it planned to merge with TMTG.
TMTG is embroiled in several lawsuits over interests in the company, including a legal battle with two of Truth Social’s co-founders, Andy Litinsky and Wesley Moss.
Trump, the former president and Republican candidate for the White House, owns about 57% of Trump Media shares.
The stock has fallen from more than $40 a share over the past two months, partly as the chances of Trump winning the White House have diminished since Kamala Harris replaced President Joe Biden as the Democratic nominee.
Trump Media’s revenue is equivalent to two Starbucks coffee houses, and strategists say its market cap is disconnected from its day-to-day operations. It lost $869,900 in its most recent reported quarter, which ended June 30.
(Reporting by Tom Hals in Wilmington, Delaware; additional reporting by Medha Singh, Echo Wang and Helen Coster; editing by Deepa Babington)
