April 16, 2024

The media company that Donald Trump recently took public is suing its co-founders, accusing them of failing “spectacularly” to get the company off the ground and then trying to “thwart the deal.”

The lawsuit filed in Sarasota County, Florida, civil court seeks to bar Trump Media & Technology Group co-founders Wesley Moss and Andrew Litinsky from appointing members to the company’s board — or from owning any of its shares.

Moss and Litinsky claim that a 2021 agreement that Trump signed with a company they founded, United Atlantic Ventures, LLC, guarantees them an 8.6% share of Trump Media’s total stock, undiluted by the issuance of new shares.

At DJT’s closing price Tuesday, that share would be worth about $601 million.

In February, Moss and Litinsky sued Trump Media in Delaware Chancery Court over their stake in the company.

The suit was filed in late March, around the same time that shareholders in the shell company Digital World Acquisition Corp. voted to approve a merger with Trump Media, a private company behind the fledgling social media app Truth Social.

Following the special purpose merger, stock in the newly public Trump Media began trading under the ticker DJT and shot up by as much as 50% in its Nasdaq debut last week.

But the share price fell sharply Monday, after the company disclosed a $58.2 million net loss in 2023.

Trump Media’s lawsuit, filed in Florida, wants the court to award it damages for what it claims are Moss and Litinsky’s “breaches of fiduciary duty.”

In addition to Moss and Litinsky, the lawsuit names DWAC founder Patrick Orlando a co-defendant, accusing him of being involved in those breaches.

According to the Florida suit, Moss and Litinsky were responsible for establishing Trump Media’s corporate governance structure, preparing the launch of Truth Social and finding a shell company for a merger to take the media company public, the lawsuit says.

Moss and Litinsky failed “at every turn,” Trump Media alleges of the two men, both former contestants on Trump’s former reality TV show “The Apprentice.”

They made “wasteful decisions” that caused “significant damage” to Trump Media and a decline in DWAC’s stock price, the company claims. And they chose to pursue a merger with Orlando’s Benessere Capital Acquisition Corp., despite a business conflict with DWAC that ultimately triggered an investigation by the Securities and Exchange Commission, according to the lawsuit.

Moss and Litinsky then “decided to retaliate” on the eve of Trump Media-DWAC merger vote by suing the soon-to-be-public company, per the suit, which was first reported by Bloomberg.

Trump Media calls the claim that UAV is owed stock “baseless,” and says the services agreement Trump signed with UAV in 2021 is no longer valid.

According to the lawsuit, after Trump’s representatives raised concerns about the agreement in July 2021, Eric Trump sent UAV a letter saying that his father had “deemed” the agreement to be “void.” UAV allegedly “acquiesced” to the elder Trump’s decision to void the contract.

Lawyers for Trump Media did not immediately respond to CNBC’s request for comment on the lawsuit. Litinsky and Moss could not immediately be contacted.

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