By Tom Hals
WILMINGTON, Delaware (Reuters) -Trump Media & Technology Group Corp breached an agreement with Patrick Orlando's ARC Global and was ordered to deliver to the group a larger portion of stock in the company, a Delaware judge said in an opinion 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 had breached its contract with the ARC investment vehicle. As a result, ARC was being shortchanged stock in Trump Media (TMTG), according to Will.
However, Will ruled against ARC on its claims that the directors of the 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 were down 4.2% in early Tuesday trading at $16.54.
Orlando had been the chief executive of DWAC when it struck a deal to merge with TMTG, although he was ousted before the deal closed this year and TMTG became a public company.
ARC sued earlier this year alleging it was being shortchanged stock in a public TMTG.
ARC owned Class B stock in DWAC that was to convert to Class A stock when the TMTG deal closed.
ARC wanted a conversion ratio of 1.8178 for each Class B share while TMTG argued the ratio should be 1.3481. Will settled on 1.4911.
"What should have been a straightforward exercise in contract interpretation and math was obscured by the parties’ injection of other issues," Will said in her opinion.
A lock-up period allowing ARC and Trump to sell their stock is set to expire on Thursday, according to Will's opinion. Trump said last week he did not want to sell his stock, sending shares of TMTG higher on Friday.
Orlando was sued by the Securities and Exchange Commission in July for securities fraud because he failed to disclose that DWAC had a plan to merge with TMTG when DWAC went public.
TMTG has been embroiled in several lawsuits over stakes in the company, including a legal battle with two cofounders of Truth Social, Andy Litinsky and Wesley Moss.
Trump, the former president and Republican candidate for the White House, owns about 57% of Trump Media stock.
The stock has fallen over the past two months from more than $40 a share, in part because Trump's odds of winning the White House have slipped since Kamala Harris replaced President Joe Biden as the Democratic candidate.
Trump Media's revenue is equivalent to two Starbucks coffee shops, and strategists say its stock market value is detached from its day-to-day business. It lost $869,900 in its most recent reported quarter ended June 30.
(Reporting by Tom Hals in Wilmington, Delaware; additional reporting by Medha Singh, Echo Wang and Helen Coster, editing by Deepa Babington)