A former executive of the blank-check acquisition vehicle that plans to take Donald Trump's social media company public sued to block the deal until he obtained a larger payout, according to a lawsuit docketed on Thursday in Delaware.
ARC Global Investments II, which is controlled by Patrick Orlando, said it was being short-changed the amount of stock it should receive in Digital World Acquisition Corp (DWAC) once it merged with the former president's Trump Media & Technology Group Corp (TMTG).
It asked the Delaware's Court of Chancery to expedite the case to resolve the stake prior to the March 22 vote by DWAC shareholders to approve the deal.
Shares in DWAC ended Thursday trading down about 9% at $41.16.
Orlando and the legal teams for DWAC and Trump's company did not immediately respond to a request for comment.
ARC's lawsuit follows a warning earlier this month by DWAC that Orlando could delay the deal.
On Tuesday, Trump's media company and DWAC sued ARC and Orlando in Sarasota, Florida, accusing him of trying to hold up the merger that is expected to close next month and "obtain a windfall by way of extortion."
The dispute centers on the rate at which ARC's class B DWAC shares convert to class A shares when the merger closes. Orland's ARC said it should receive 1.78 class A shares for each class B share. DWAC said the ratio was 1.34. The company said in a regulatory filing the difference between the two ratios was more than 2.5 million shares.
DWAC asked the Florida court to declare that 1.34 was the correct ratio to convert's ARC's stock.
Separately, Trump's company was sued by Andy Litinsky and Wes Moss, two former contestants on Trump's reality TV show The Apprentice, who own stock in Trump's company through their United Atlantic Ventures partnership.
They pair said they obtained their TMTG stock for helping launch the company.
They allege that Trump's TMTG authorized a potential hike in its equity capital from 120 million shares to 1 billion shares to enrich Trump and dilute their 8.6% stake to less than 1%. They called it a "last-minute stock grab" by the former president at a time when he is facing soaring legal bills.
Trump has been hit with more than $500 million in two separate judgments in New York in recent months. His lawyers said on Wednesday he was unable to post a bond for the full amount of a $454 million judgment in a civil fraud case.
Earlier this month, the U.S. Securities and Exchange Commission cleared Trump's company, which operates the Truth Social messaging platform, to complete the merger.
The combined company could be worth $10 billion and the former president's stake could be worth billions of dollars.
DWAC signed its merger agreement with Trump's company in October 2021 and since then has been the target of investigations by the U.S. Department of Justice and reached an $18 million settlement with the SEC over inaccurate disclosures.
The company fired Orlando and shook up its board since signing the merger deal and has blamed him for its struggles in closing the merger.
Trump's company has been losing money since agreeing to the deal.
TMTG, which lost $10.6 million from its operations in the first nine months of 2023 after losing $23.2 million in 2022, funded itself by borrowing $40.5 million through convertible promissory notes that can be paid back in stock, according to a regulatory filing published earlier this month.
Separately, TMTG issued as much as $9.2 million in additional convertible promissory notes to reward executives, the filing shows.
