• Trump Media breached an agreement with one of the investors that helped the company go public and must grant the sponsor a larger share of stock, a judge ruled.
• The blank-check firm DWAC underestimated the amount of stock that investor ARC Global should get following the merger that took Trump Media public, the judge ruled.
• The ruling came days before DJT's majority-owner Donald Trump and others will be free to start selling their shares in the company behind Truth Social.

Trump Media breached an agreement with one of the investors that helped the company go public, and must grant the investor a larger share of its stock, a judge ruled.

The order in Delaware Chancery Court on Monday came just three days before the investor, ARC Global, and other insiders — including majority-owner Donald Trump — will be free to start selling their shares in the company behind Truth Social.

If those insiders opt to cash out their stakes, they could be in line for a major payday. But they could also tank investor confidence and drive down Trump Media's value, which has already fallen by billions of dollars amid a monthslong stock slump.

The judge in the Delaware case, Vice Chancellor Lori Will, determined that the blank-check company Digital World Acquisition Corp., or DWAC, underestimated the amount of stock that was due to ARC Global, as part of the merger that took Trump Media public in March.

But Will, in her 44-page ruling, also found that the stock-conversion ratio proposed by ARC was too high. And she rejected a number of other claims put forward by both ARC and DWAC as "meritless" diversions.

ARC bought Class B shares of DWAC, a special purpose acquisition company intended to merge with another business and go public.

After DWAC merged with Trump Media, those Class B shares were supposed to automatically convert to Class A stock at a 1-to-1 ratio. But since the company issued more Class A shares after going public, a different stock conversion ratio applied.

DWAC argued the ratio is 1.3481 to 1. ARC said it should be 1.8178 to 1. Will set the ratio in between the two, at 1.4911 to 1.

"ARC is entitled to 8,186,345 Class A shares in conversion for its 5,490,000 Class B shares," Will wrote in a separate order.

She also ordered the parties to work with an escrow agent "for the release [of] the appropriate number of shares to satisfy ARC's conversion rights" so that the investor "can freely sell or transfer those shares upon the expiration of the contractual lock-up."

The lock-up agreement, which bars Trump and other company insiders from selling their shares for about six months after it started trading as DJT on the Nasdaq, expires on Thursday.

The company still boasts a market capitalization of more than $3.3 billion, even as its latest quarterly earnings reports show multimillion-dollar net losses on little revenue.

Analysts have come to see individual investments in Trump Media as a proxy for supporting the Republican presidential nominee and betting on his political fortunes.

Trump owns 114,750,000 shares, or nearly 57%, of the company's stock. That stake as of midday Tuesday was worth nearly $2 billion, or about half of Trump's on-paper net worth as calculated by Forbes.

But Trump said last week that he has "absolutely no intention of selling."

The announcement sent DJT shares soaring.

Trump Media is embroiled in numerous other lawsuits with ARC and its founder, Patrick Orlando, along with others involved in the public merger.

In a Florida lawsuit, Trump Media has warned that ARC and another investment vehicle, United Atlantic Ventures, are planning an "imminent sale" of more than 18 million DJT shares once the lock-up lifts.

Trump Media in a filing in that same lawsuit on Monday sought an "emergency" court hearing.