- Natalie Sherman
- new york business reporter
image source, Getty Images
President Donald Trump appears to be fighting for funds to pay a $464m (£365m) fraud fine. Will the stock market save him?
Trump Media, which operates the social media platform Truth Social, is poised to become a public company on Friday after a majority of Digital World Acquisition Corp.'s shareholders voted in favor of the acquisition.
Trump will own at least a 58% stake in the combined company, worth about $3 billion at Digital World's current stock price.
This is a stunning potential windfall for Mr. Trump in exchange for a company whose auditors last year warned it was at risk of failure.
Never mind the many red flags associated with this deal, including an unresolved lawsuit from a former business partner. There's also an $18 million settlement that Digital World agreed to pay last year to resolve fraud charges surrounding how the proposed merger was put together.
Digital World's stock price rose to more than $45 per share on Friday ahead of the approval, but has since fallen to less than $40.
Supporters of the digital world, the vast majority of whom are individual investors rather than Wall Street firms, and who are clearly Trump supporters, seem undaunted.
“This is just the beginning,” Chad Nedohin, a supporter of the deal, said on “DWAC Live” on the video platform Rumble after the approval was announced. “There's no reason to panic.”
Digital World, or DWAC (pronounced D-whack), is what's known as a SPAC, or a shell business created specifically to acquire another company and take it public.
The company, now renamed Trump Media & Technology Group, could begin trading on the Nasdaq stock exchange as early as next week under the ticker DJT.
The deal is unlikely to immediately resolve Mr. Trump's most pressing financial problems, including fines for fraud in New York.
The former president will be barred from selling stock for at least six months, but the new company may grant him an exemption.
Mr. Trump may also try to obtain a loan based on the value of the stock. But analysts said banks would likely lend him significantly less than the paper value of the shares in this case, given the potential risks of the business.
Still, some of his supporters hope their support will help.
Nedohin, who identifies himself as Canada's “worship leader” on his website and goes by Captain DWAC on Truth Social, declined to be interviewed.
But on this week's show, he urged investors to approve the deal, speculating that it could help the former president's legal battles.
“If the merger were to close at 10 a.m. on Friday and President Trump suddenly had 120 million shares of DJT stock worth $10 billion, who knows? He could use that to make easy loans. “You will be able to receive it,” he said.
He added: “This is about throwing money at free speech to save the country, and you could lose it all.”
Analysts say the risk for Digital World shareholders to lose money on their investments is high.
The stock price has fallen from the highs reached after the Trump Media takeover plan was announced in 2021.
But they still imply that Trump Media is worth more than $5 billion, though it made just $3.3 million in revenue and lost nearly $50 million in the first nine months of last year. Considering this, this is a large number.
The merger would provide Trump Media with an influx of more than $200 million in cash that it could use for growth and expansion.
But Truth Social, which launched to the public in 2022 and is branded as an alternative to major social media platforms like Twitter and Facebook, has remained small for now.
The company claims about 8.9 million people have signed up, and in a regulatory filing, Trump Media has given prospective investors an overview of how the company is operating, including user growth and engagement. It warns that it does not track specific indicators. And he says he has very little intention of doing so.
An outside company estimates that Truth Social received about 5 million visits in February. By comparison, Elon Musk's X (formerly Twitter) was recently valued at about $14 billion by an investor and received more than $100 million.
Analysts said Digital World is a perfect example of a “meme stock,” whose stock price diverges from a company's fundamentals and is ultimately destined to decline.
Jay Ritter, a finance professor at the University of Florida, said: “We predict a collapse with the Trump media, but whether it will happen in a week or two years and how quickly… It’s really difficult.” People who track public listings.
Marco Iachini, senior vice president of research at Vanda Securities, said retail investors rushed into Digital World stocks after the announcement of the deal with President Trump and also in January, when Trump won the Iowa primary. .
Ahead of this week's vote, he said activity has decreased, a sign that specialist firms may be leading the deal.
Whatever the buyer's motivations, Trump, whose main contribution to Trump Media is his name and posts on the platform, appears poised to be the biggest beneficiary.
“This is a tremendous transfer of value from. [investors]…For Trump, that should be very lucrative for him,” said Michael Ohlrogge, a New York University law professor who has studied the public listings of companies such as Trump Media.
