Former President Donald J. Trump's social media company and the parent company of his favorite digital communications platform, Truth Social, merged with a shell company on Friday, adding about $3 billion to Trump's wealth. , could provide Trump with a new source of funding. Pay the ever-increasing legal costs.
Investors in the paper entity Digital World Acquisition Corporation will now become shareholders in Trump Media & Technology Group. The three-year-old company could start trading on the stock market as early as Monday under the stock symbol DJT. The deal transfers more than $300 million from Digital World's coffers to Trump Media, which is struggling with little revenue, and allows Truth Social to continue operating.
Based on Digital World's $44 per share price just before Friday's vote announcement, Trump Media would have a market value of more than $5 billion. Given that he owns more than 60% of the company's stock, Trump's net worth would increase by $3 billion, instantly doubling from the $2.6 that Forbes magazine estimated in October.
So far, these gains have been on paper and due to restrictions in the merger agreement that prohibit major shareholders from selling their shares or using their shares as collateral for at least six months, Trump is unlikely to It is unlikely that it can be exchanged for cash. debt. However, since Trump controls much of Trump Media and his allies are expected to form a majority of the new board, these restrictions could be lifted at his request. There is.
The question of where Trump can raise money has become an urgent question as he faces hundreds of millions of dollars in legal claims related to multiple lawsuits against him. Trump faces a deadline on Monday to pay a $454 million fine in a civil fraud case brought by the New York attorney general's office alleging that Trump drastically inflated the value of his real estate holdings through bank transactions. There is. If Trump is unable to come up with cash or bail to cover the fine while he appeals the verdict, the attorney general's office could seize some of Trump's assets.
Before Friday's meeting, Digital World's board had the authority to waive the six-month limit on stock sales, but took no action. The matter will now be referred to Trump Media's new seven-member board, which includes Trump's eldest son Donald Trump Jr. and three former members of his administration.
Before the merger was completed, Trump served as chairman of Trump Media, but neither the company nor Digital World would say whether he would continue in that role. In any case, Trump will have significant influence over the company, as he owns a majority stake of 79 million shares and his brand is essential to Trump Media's success.
Even if Mr. Trump doesn't seek or secure an exemption to sell his own stock, he will still have a lot of cash after the six-month limit expires. However, there is no guarantee that Trump Media's stock price will continue to trade at current levels. If stock prices fall in the coming months, the large increase in his net worth could be diminished by September, when he will be free to sell his shares.
Many of Digital World's 400,000 shareholders are retail investors and Trump fans, and Trump's enthusiasm for the former president has supported the stock price for years. However, it remains to be seen whether they will continue to hold onto their shares now that the merger is complete.
“The merger will enable Truth Social to strengthen and expand our platform,” Trump Media said in a statement before the vote.
With the future of his real estate business in flux after a New York civil fraud ruling, Trump Media could become one of Trump's major cash cows if he wins the presidential election in November. If this happens, it could become a potential source of conflict. Trump Media currently derives the majority of its revenue from Truth Social. Truth Social is a platform where several startups promote their products, targeting Trump supporters with slogans that include variations of “America First” and “Make America Great Again.” are doing.
The Digital World-Trump Media merger, first proposed in October 2021, is one of the highest-profile deals to emerge from the initial public offering strategy that has become wildly popular for many companies during the pandemic. Special acquisition vehicles, such as Digital World, are speculative investment vehicles created for the sole purpose of raising capital in an initial public offering and then finding operating businesses to acquire.
In going public through a SPAC merger, Trump Media announced that Rumble, an online video streaming service that caters to right-wing media personalities, and the “patriotic parallel economy.”
In the first nine months of last year, Trump Media earned just $3.3 million in ad revenue on Truth Social, and the company suffered a net loss of $49 million over the same period.
“It's unclear to me what the strategy is for building a platform to specifically reach a wide range of advertisers,” said Shannon McGregor, a professor of journalism and media at the University of North Carolina. “These niche markets seem to have a ceiling.”
The merger was nearly derailed by a Securities and Exchange Commission investigation into deal negotiations between the two companies that preceded Digital World's initial public offering. Securities rules prohibit SPACs from engaging in meaningful merger negotiations before going public.
But the deal was back on track after Digital World settled with the SEC in July, agreeing to pay an $18 million penalty and amend its corporate filings after the merger closes.
After the deal was finalized on Friday, many shareholders and Trump fans celebrated online. Chad Nedohin, a vocal proponent of the merger at Truth Social, posted a livestream of the shareholder meeting on Rumble. In the chat room, viewers shared their enthusiasm for the deal, sending messages such as “It's a great day to be alive” and “The day has finally come.”
