Delaware Judge Rules in Favor of ARC Global in Lawsuit Against Trump Media
A Delaware judge has ruled that Trump Media & Technology Group (TMTG), the company behind Truth Social, breached an agreement with ARC Global and must give it more than half a million additional shares. Judge Lori Will of the Delaware Chancery Court issued the ruling on September 16, finding that ARC Global is entitled to receive 8.19 million shares of TMTG, more than the 7.04 million shares previously allocated to it.
ARC Global, led by Patrick Orlando, was an early investor in Digital World Acquisition Corp. (DWAC), a special-purpose acquisition company that later merged with TMTG, making the company public. The case revolved around a contract dispute related to DWAC’s certificate of incorporation, which set the rules for how Class B shares would convert into Class A shares upon a business combination.
ARC Global accused TMTG of deliberately setting a share conversion ratio that was unfavorable to it, reducing ARC’s expected stake. Trump Media, on the other hand, accused Orlando of mismanagement and raised concerns about his handling of the deal. Judge Will determined that ARC Global had “prevailed on aspects of its breach of contract claim” and corrected the stock allocation by awarding ARC more shares.
However, the judge did not grant ARC Global the full 10 million shares it had originally sought, rejecting its allegations of breach of fiduciary duty against TMTG’s board. Judge Will concluded that the board’s actions were not driven by bad faith but criticized both parties for complicating what should have been a simple process. She stated that “what should have been a straightforward exercise in contract interpretation and math was obscured by the parties’ injection of other issues.”
In her ruling, Judge Will set the conversion ratio at 1.4911:1, a value roughly in the middle of what DWAC had calculated after Orlando’s ouster and what ARC was demanding. The judge also noted that the contract prevents ARC and Trump Media from selling their stock until the lock-up period expires on September 19.
The ruling is a significant victory for ARC Global, as it secures additional shares and strengthens its position as an early investor in TMTG. The decision also highlights the complexities and challenges that can arise in contract disputes, with Judge Will criticizing both parties for introducing unrelated issues into the case.
Neither ARC Global nor Trump Media has commented on the ruling. However, former President Donald Trump has stated that he does not plan to sell his shares in TMTG, which are currently valued at around $1.84 billion. Trump Media, with a market cap of approximately $3.23 billion, experienced a surge in value following its Wall Street debut, reaching nearly $10 billion.
The ruling by Judge Will provides clarity and resolution to the contract dispute between ARC Global and Trump Media. It underscores the importance of contract interpretation and the need for parties to adhere to their obligations in business agreements. As the legal battle concludes, both companies will now focus on complying with the court’s decision and moving forward with their respective business endeavors.