Donald Trump is making a comeback in the stock market, with the former president poised to receive a substantial payout as a result.
Shareholders of Digital World Acquisition Corp., a publicly traded shell company, have approved a merger deal with Trump’s media business in a vote held on Friday. This paves the way for Trump Media & Technology Group, known for its flagship product Truth Social, to soon trade on the Nasdaq stock market.
Following the merger, Trump is poised to possess the majority of the combined company, equating to approximately 79 million shares. With Digital World’s closing stock price on Friday at $36.94, Trump’s stake could potentially value nearly $3 billion.
This approval comes amid a significant legal challenge for Trump, as he faces a $454 million judgment in a fraud lawsuit, marking one of his most expensive legal battles to date.
However, Trump won’t be able to immediately benefit from the deal’s financial gains unless alterations are made to a “lock-up” provision, which currently prohibits company insiders from selling newly issued shares for six months.
The Trump presidential campaign did not respond promptly to a request for comment.
When a publicly traded shell company agrees to acquire a private company, the private company assumes its position on a stock exchange upon approval by shareholders. Recent activity in Digital World’s stock suggests that Trump Media shareholders could face volatility.
A significant portion of Digital World’s investors comprises small-time investors who are either supporters of Trump or seeking to capitalize on the frenzy, rather than major institutional or professional investors. These shareholders contributed to the stock’s more than doubling this year in anticipation of the merger. However, on Friday, the shares experienced a decline of nearly 14%.
Trump’s initial venture into the stock market proved unsuccessful. In 1995, Trump Hotels and Casino Resorts went public with the symbol DJT, the same symbol that Trump Media will use. However, by 2004, Trump’s casino enterprise had declared bankruptcy and was removed from the New York Stock Exchange.
Prior to Friday’s approval, Digital World, in its regulatory filings, outlined various risks confronting its investors, as well as those associated with the Truth Social owner once Trump Media also becomes public. One such risk highlighted by the company is that Trump, as a controlling stockholder, would have the right to vote in his own interest, which might not always align with the broader shareholder interests.
Additionally, Digital World pointed out the substantial failure rate of new social media platforms and Trump Media’s anticipation of ongoing financial losses. In the first nine months of the prior year, Trump Media incurred a loss of $49 million, with revenue totaling just $3.4 million and interest expenses amounting to $37.7 million.
Shareholders of DWA also voted on Friday to approve a roster of seven individuals, including Donald Trump Jr., to serve on Trump Media’s board. Others include former Republican Rep. Devin Nunes, slated to be the company’s CEO; Robert Lighthizer, Trump’s former U.S. trade representative; Linda McMahon, who headed the Small Business Administration during Trump’s tenure; and Kashyap “Kash” Patel, a former White House national security aide.
The merger plans between Trump Media and Digital World were initially announced in October 2021. However, the deal encountered obstacles including a federal probe and a series of lawsuits leading up to Friday’s vote.
Truth Social, launched in February 2022, emerged a year after major social platforms such as Facebook and Twitter (the latter now rebranded as X) banned Trump in the aftermath of the January 6 insurrection at the U.S. Capitol. Although reinstated on both platforms, Trump has remained loyal to Truth Social as a platform to amplify his message.
In a Thursday evening post on the social media network, Trump endorsed Truth Social, stating: “TRUTH SOCIAL IS MY VOICE, AND THE REAL VOICE OF AMERICA!!! MAGA2024!!!”
Trump Media has yet to disclose Truth Social’s user numbers. However, research firm Similarweb estimates approximately 5 million active mobile and web users for the platform in February. While this figure falls considerably below TikTok’s over 2 billion and Facebook’s 3 billion, it surpasses other “alt-tech” rivals like Parler, which has been offline for almost a year but is planning a comeback, or Gettr, which had fewer than 2 million visitors in February.
Entering the public market necessitates Trump’s social media venture to divulge more information. Privately held firms are answerable to their proprietors, whereas publicly traded ones are answerable to shareholders who possess the company’s stock. Upon going public, Trump Media will be mandated to disclose its quarterly financials and other significant updates to federal authorities.
In this regard, Truth Social encounters similar challenges as X, grappling with mainstream advertisers who are wary of affiliating with hate speech and contentious material.
Read More: Trump criticizes Facebook, warns against TikTok ban, claims it would benefit Meta
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