Former President Donald Trump is expected to gain $3 billion, doubling his net worth, as a result of a windfall from his social media outlet, Truth Social, going public.
Investors voted to approve a merger between Digital World Acquisition Corp. (DWAC) and Trump Media & Technology Group (TMTG), the owner of Truth Social. The newly combined company could begin trading on the Nasdaq Composite Index as early as next week under the DJT ticker, the same symbol used for Trump Hotels & Casino Resorts before it filed for bankruptcy protection in 2004.
Based on the $44 price before the vote announcement, the newly formed company will debut with a roughly $5 billion market value.
The deal frees up $293 million that DWAC raised in its initial public offering (IPO) and will be injected into Trump Media.
Overall, the merger will net former President Trump billions of dollars on paper. However, he would need to overcome several hurdles to access this infusion of money amid several financial burdens and legal challenges.
The merger comes as reports suggest New York Attorney General Letitia James could begin seizing former President Trump’s assets on March 25 unless an appeals court rules in his favor.
DWAC shares rallied about 4 percent at the start of the March 22 trading session and quickly pared its gains after the shareholder vote. The special acquisition firm has rocketed 155 percent year-to-date.
The publicly traded blank-check company, DWAC, established during the pandemic-era frenzy on Wall Street in 2020, first proposed purchasing TMTG in October 2021. Since then, there have been multiple bumps along the way, including several legal challenges from the Department of Justice and the Securities and Exchange Commission (SEC).
Earlier this month, a Delaware court ruled that DWAC could advance with the scheduled vote.
Solutions to Trump’s Financial Challenges
Truth Social’s Wall Street debut could offer former President Trump more than $3 billion on paper. The presumptive Republican nominee will own close to 79 million shares, accounting for nearly 60 percent of the combined company.
At a time when President Trump faces a plethora of financial challenges, including a $454 million judgment in his fraud lawsuit, it could be a tremendous opportunity to cash out. Financial and legal observers say it might not be that easy.
This is because Trump Media & Technology Group shareholders will be under a lockup provision for six months after the deal’s close. This typical rule in the financial markets prohibits early investors from quickly dumping their shares once the firm goes public.
As a result, President Trump is unable to sell or use the shares as collateral for the next six months unless he obtains a waiver from the shell company DWAC.
A senior executive at a large U.S. hedge fund, speaking on the condition of anonymity, noted that President Trump could “conceptually’ receive a waiver depending on the other party agreeing to it.
“And even if they agree, he will need to get loans from banks with these shares as collateral and the banks will need to underwrite those loans,” he said.
“None of this is a slam dunk or guaranteed,” he added.
The board could feature Donald Trump Jr., former Rep. Devin Nunes (R-Calif.), and previous administration officials, including U.S. Trade Representative Robert Lighthizer and Small Business Administration chief Linda McMahon.
Should the former president struggle to cash out early, the stock could face long-term challenges, potentially diminishing its value and the amount he could profit from it.
Truth Social is facing the same challenges as many other tech startups.
The social media firm has reported a $10.6 million operating loss in the first nine months of 2023. However, revenues increased to $3.38 million during this period, up from $237 thousand in 2022. The revenue boost was driven by an increase in the user base as well as the platform’s early-stage testing of a new advertising program.
As an early-stage company, Truth Social expects to incur operating losses “for the foreseeable future.”
Moreover, the one feature that Truth Social attempted to separate itself from the ecosystem of other platforms was to “stand up to Big Tech” and the sector’s censorship efforts. However, since billionaire Elon Musk acquired X (formerly Twitter), one of the world’s largest social media outlets has largely abandoned the previous management’s speech-censoring endeavors. Hence, some observers believe X may challenge Truth Social’s growth potential.
According to Securities and Exchange Commission (SEC) regulatory filings, the company warned President Trump might vote in his own interests rather than what is best for the company.
For now, because of questionable fundamentals, the trading strategy might appear to be betting on President Donald Trump’s name and gaining from the press attention that Truth Social will garner from the merger.
From The Epoch Times
