NEW YORK — Donald Trump is returning to the stock market, and the former president will profit handsomely.
In a vote on Friday, shareholders of Digital World Acquisition Corp., a publicly traded shell company, approved a merger with Donald Trump’s media business. That means Trump Media & Technology Group, whose flagship product is social networking site Truth Social, will soon be listed on the Nasdaq stock exchange.
Trump’s Social Media Company Approved To Go Public, Potentially Netting Former President Billions
Trump is slated to possess most of the combined business, or approximately 79 million shares. Multiply it by Digital World’s Thursday closing stock price of $42.81; his investment may be worth more than $3 billion.
The approval comes when the likely Republican presidential nominee faces his most expensive legal battle: a $454 million judgment in a fraud case.
However, Trump will not be able to cash out the deal’s windfall until the company’s board alters a “lock-up” provision prohibiting insiders from selling freshly issued shares for six months.
Trump’s presidential campaign has yet to immediately reply to a request for comment.
When a publicly traded shell company agrees to buy a private company, the target company joins a stock exchange once shareholders approve the merger. If recent movement in Digital World’s stock is any indicator, Trump Media stockholders may be in for a wild ride.
Instead of large institutional and experienced investors, many of Digital World’s investors are small-time investors who are either Trump supporters or looking to cash in on the craze. Those stockholders helped the stock more than quadruple this year in anticipation of the merger’s completion. After the deal was completed on Friday, shares plunged as much as 12% before recovering to roughly 2.5% by lunchtime.
Trump’s previous venture into the stock market could have gone better. Trump Hotels and Casino Resorts went public in 1995 with the DJT ticker, which Trump Media will trade under. In 2004, Trump’s casino company filed for bankruptcy and was delisted from the New York Stock Exchange.
Before Friday’s approval, Digital World’s regulatory filings detailed several of the dangers that its investors and the Truth Social owner will face once Trump Media becomes public.
Trump’s Social Media Company Approved To Go Public, Potentially Netting Former President Billions
According to the business, one concern is that Trump, as a dominant stakeholder, would be entitled to vote in his interests, which may only sometimes be in the best interests of all shareholders. Digital World also mentioned the high incidence of failure for new social media platforms, as well as Trump Media’s prediction that it will lose money on its operations “for the foreseeable future.”
Trump Media lost $49 million in the first nine months of last year, bringing in only $3.4 million in income and incurring $37.7 million in interest expenses.
Trump Media and Digital World first announced their merger ambitions in October 2021. Prior to Friday’s decision, the merger faced a number of lawsuits in addition to a federal investigation.
Truth Social debuted in February 2022, one year after Trump was barred from major social media platforms such as Facebook and Twitter, the platform now known as X, following the Jan. 6 revolt at the US Capitol. He has now been restored in both, but Truth Social remains his primary platform for spreading his ideas.
Thursday evening, Trump praised Truth Social on social media: “TRUTH SOCIAL IS MY VOICE, AND THE REAL VOICE OF AMERICA!!! MAGA2024!!!”
Trump’s Social Media Company Approved To Go Public, Potentially Netting Former President Billions
So far, Trump Media has not published the number of Truth Social users. However, research firm Similarweb says there were approximately 5 million active mobile and web users in February. That’s significantly less than TikTok’s more than 2 billion and Facebook’s 3 billion, but it’s still more than other “alt-tech” rivals like Parler, which has been down for nearly a year but plans to relaunch, and Gettr, which had less than 2 million visitors in February.
With a public offering, Trump’s social media company will soon be required to reveal more information.
Private corporations are responsible to their owners, whereas public companies are liable to the shareholders who own the company’s stock. Once public, Trump Media will be compelled to report quarterly financial results and relevant news to federal regulators.
In this regard, Truth Social confronts some of the same issues that X has been dealing with: mainstream sponsors who do not want to be connected with hate speech and other problematic content.
SOURCE – (AP)
