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| Republican presidential candidate and former U.S. President Donald Trump gestures at a campaign event at the Forum River Center in Rome, Georgia, U.S. March 9, 2024 |
March 22 (mod1s) - Former U.S. President Donald Trump took a step closer on Friday to reaping a large gain from his social media corporation after investors in a blank-check acquisition company approved a merger now valued roughly $5.7 billion.
The transaction puts Trump's controlling share in the business that hosts his app Truth Social at around $3.3 billion. The windfall might prove significant as Trump grapples with the financial impact of a succession of legal proceedings against him, including a $454 million verdict in a civil fraud case in New York.
Shareholders of Digital World Acquisition Corp (DWAC) (DWAC.O), opens new tab, the special purpose acquisition company (SPAC) that aims to list Trump Media & Technology Group on the stock market via a merger, voted in support of the transaction on Friday.
While the next stage would be for the agreement to be concluded next week, its future is clouded with uncertainties. Digital World's former CEO Patrick Orlando and former Trump business associates Andy Litinsky and Wes Moss have separately sued to seek for additional shares for their earlier work on the sale.
It is unknown how and when these matters will be settled. Even if the merger is finalized next week, Trump will not be permitted to sell any of his shares in the merged business for six months or borrow against them, depending on conditions he already accepted.
The purchase is also anticipated to give a significant $300 million financial injection to Truth Social parent Trump Media & Technology Group (TMTG). The social media firm lost $10.6 million from its operations in the first nine months of 2023 on sales of $3.4 million. It has been supporting itself by borrowing $40.7 million using convertible promissory notes that may be paid back in equity.
Based on how Digital World's shares have recently traded, TMTG would be valued at as much as $5.7 billion after its merger with Digital World on an undiluted basis and as much as $8.6 billion on fully diluted one that takes into account warrants to be exercised and earnout shares to be granted.
In a rise spurred by Trump supporters and other retail investors, Digital World's stock has roughly doubled since its tie-up with TMTG was announced in 2021.
Buying the stock "will help President Trump get his bond, buying 4 shares by all will benefit all," Truth Social user @racinrob stated in a post this week.
Digital World's shares plummeted over 10% on Friday after the deal's shareholder approval.
An $8.6 billion fully diluted value for the merged firm would be a bit less than half that of Elon Musk's considerably more popular social networking platform X.
In February, Digital World stated Truth Social had so far attracted 8.9 million sign-ups. X, by contrast, has more over half a billion monthly users, according to Musk.
Trump has 6.7 million followers on Truth Social, compared to the more than 88 million followers he had on X when the network permanently banned him, and the 87.4 million followers he now has on that platform.
DEAL HURDLES
Trump, who is trying to be U.S. president again, will possess between 58.1% and 69.4% of the merged firm, depending on the degree to which investors approve the transaction.
TMTG was founded with the aid of Litinsky and Moss - two former competitors on Trump's reality TV program “The Apprentice” - as a method for Trump to interact with his followers after Facebook, Twitter and YouTube withdrew him after the Jan. 6, 2021 assault on the U.S. Capitol.
Since 2021, the agreement has experienced obstacles and delays. Digital World has been a focus of investigations by the U.S. Department of Justice and the Securities and Exchange Commission (SEC), dismissed Orlando as its top executive, and changed up its board.
In July, Digital World negotiated a $18-million settlement with the SEC, which alleged Digital World deceived investors by failing to disclose in documents that it had devised a strategy to buy TMTG and was pursuing the purchase before Digital World’s first public offering.
In August, Trump shared on X his mug photo from his booking at Fulton County Jail in Georgia. He has not posted on X since, utilizing Truth Social as his sole platform to contact voters.