Former President Donald Trump could reap a windfall of as much as $4 billion from an upcoming merger tied to his social media company — a deal that could give him massive financial relief as he needs to cough up $540 million from judgments in civil lawsuits.
Since Jan. 1, shares of Digital World Acquisition Corp, the “blank check” firm created solely for the purpose of acquiring the parent company that runs Trump’s Truth Social platform, Trump Media & Technology Group, have surged by a whopping 161%.
Earlier this month, the Securities and Exchange Commission approved the pending merger, which could be worth as much as $10 billion. It is set to go to a shareholder vote on March 22.
If the merger is approved, Trump’s stake could be valued at as much as $3.95 billion, according to filings showing that the former president would own around 79 million shares in the newly formed venture.
However, Trump would have to wait at least five months for the lock-up period to expire before dumping his shares, unless the company files to expedite that timing.
“He needs the money but he can’t sell too much at once without risking tanking the stock,” Usha Rodrigues, a professor at the University of Georgia School of Law, told Bloomberg.
“Once the lockup is expired, he could use the shares as collateral for loans in order to access cash without selling the shares.”
It’s unlikely that Trump would be able to get a bank to lend him money against the locked-up shares, University of Florida finance professor Jay Ritter told Bloomberg.
Nevertheless, while Trump’s legal problems have multiplied, his financial state appears to be on the upswing thanks to the domination of his GOP political rivals in the presidential primaries.
The 45th president handily defeated former South Carolina Gov. Nikki Haley in Tuesday’s Michigan primary — repeating the landslide victories in Iowa, New Hampshire, and the former ambassador’s home state.
Despite the fact that Truth Social has just a fraction of the number of users that larger rivals such as X (formerly Twitter) can boast, retail investors have bought up shares in DWAC just as Trump’s re-election campaign has gained momentum.
If Trump were to win the presidency for a second term, he would most likely use his Truth Social platform as his official bully pulpit — thereby exponentially increasing the value of the app, according to observers.
The value assigned to the deal by the stock market has jumped more than threefold since January, as Trump tightened his grip on the Republication nomination for president.
Trump will own between 58.1% and 69.4% of the combined company, depending on the extent to which investors back the deal.
“The fundamental bull case is that he confines his tweets to the Truth Social platform, which means if you want to see them or interact with them, you need to sign up as well, making advertising all the more profitable,” Matthew Tuttle of Tuttle Capital Management told Bloomberg News.
Trump’s popularity with Republican voters remains intact despite his mounting legal troubles.
Earlier this month, a Manhattan judge imposed a whopping $454 million penalty on Trump’s businesses after New York State Attorney General Letitia James filed suit accusing the Trump Organization of inflating the value of its assets.
Trump has also been ordered to pay in excess of $80 million in damages to E. Jean Carroll, the magazine writer who sued for defamation after the ex-president publicly lambasted her claims that he raped her in a department store more than three decades ago.
To be sure, Digital World also disclosed new obstacles to the deal being completed.
One of them is former Digital World CEO Patrick Orlando, who helped create Digital World in its current form and controls the sponsoring entity behind it.
Digital World said in the filing that Orlando may hold up the deal because he wants to receive additional compensation.
Orlando could not be immediately reached for comment.
Another potential obstacle one involves two co-founders of TMTG, Andy Litinsky and Wes Moss, who have threatened to try to block the deal unless they receive two board seats, according to an 8-K filing by DWAC.
Digital World said that TMTG spent $38.5 million between its inception in February 2021 and September 2023, funded through borrowings and that it may issue up to $65 million in convertible notes to avoid a liquidity crunch.
TMTG posted total revenue of $3.4 million in the first nine months of 2023, up from $237,000 a year earlier, according to the Digital World filing.
Its operational loss was $10.6 million, down from $19.3 million a year earlier.
TMTG was launched to connect Trump with his followers after he was cut off from major social media platforms following the Jan. 6, 2021, attack on the US Capitol by his supporters.
Trump has 6.61 million followers on Truth Social, compared to the more than 88 million followers he had on X when the platform permanently suspended him, and the 87.4 million followers he currently has on that platform.
Digital World says Truth Social has so far had 8.9 million signups.
X, by comparison, has more than half a billion monthly users, according to the social media platform’s owner Elon Musk.
The self-proclaimed “free speech absolutist” bought Twitter on Oct. 2, 2022, and has since rebranded it to X. On Nov. 19 of that year, the San Francisco-based app reversed its position on Trump.
Last August, Trump broke a pledge to stick exclusively with Truth Social and posted on X his mug shot from his booking at Fulton County Jail in Georgia.
He has not posted on X since, using Truth Social as his primary platform to reach voters.
With Post Wires