How Donald Trump’s media merger raises his wealth by billions

Donald Trump’s social media company has completed a merger with a cash-rich shell company, a move that, if approved, will substantially increase his wealth and offer a potential source of cash to address his growing legal bills.

The merger of Trump’s social media company, including his favored communication platform, Truth Social, has resulted in the establishment of a public company. This merger is expected to raise Trump’s wealth by billions of dollars while potentially assisting in the payment of his mounting legal expenses.

With an estimated stake in the company valued at over $3 billion, Trump can explore options to raise cash based on the value of his ownership. The market value of Trump Media & Technology Group is projected to be around $5 billion upon its Wall Street debut, considering the $37 share price of its merger partner, Digital World Acquisition Corp. Since Trump owns over 60 percent of the company, his net worth will instantly double from the $2.6 billion estimated by Forbes in October.

Although the gains are currently on paper, Trump may face limitations in swiftly converting them into cash due to restrictions outlined in the merger agreement. Major shareholders are prohibited from selling shares or utilizing them as collateral for loans for a minimum of six months. However, given Trump’s significant control over Trump Media and his expected influence on the new board through his allies, it is possible that these restrictions could be waived upon his request.

The urgency to access cash arises from Trump’s substantial legal liabilities, including a $454 million penalty in a civil fraud case imposed by the New York State attorney general. Failure to cover this penalty, while appealing the ruling, could result in the seizure of some of Trump’s properties by the attorney general’s office.

While the board of Trump Media may be hesitant to permit early share sales that could potentially lower the company’s stock price, they might consider lifting the restriction on using shares as collateral to assist Trump in securing a bond and minimizing negative effects on the stock value.

Prior to the merger, Trump held the position of chairman in Trump Media, although it remains undisclosed whether he will retain this title. Regardless, Trump’s substantial ownership and the inclusion of his son, Donald Trump Jr., and former administration members on the new board solidify his significant influence over the company. Trump’s 79 million shares grant him a majority stake, and the success of Truth Social, which serves as his primary platform for reaching his supporters, relies heavily on his brand.

It should be noted that the current stock value of Trump Media may not persist. If the share price declines in the following months, the significant increase in Trump’s net worth could diminish over time. After the shareholder vote approving the merger, Digital World’s shares experienced a 14 percent drop.

As part of the merger, investors in the cash-rich shell company, Digital World, will become shareholders of Trump Media. The deal involves transferring over $300 million from Digital World to Trump Media, which has struggled with minimal revenue. This arrangement allows Truth Social to continue operating.

The shares of Trump Media may commence trading on the stock market as early as Monday, with the stock symbol DJT.

Digital World’s shareholders, many of whom are ordinary investors and Trump supporters, have played a crucial role in sustaining the company’s shares. However, it remains uncertain whether they will retain their stock now that the merger has been finalized.

Trump Media aims to enhance and expand its platform, Truth Social, through this merger, as it becomes a significant revenue source for Trump. Given the uncertainty surrounding Trump’s real estate business due to the civil fraud case ruling, Trump Media may become one of his primary sources of income. Truth Social primarily generates revenue from advertising by upstart companies targeting Trump’s supporters, utilizing slogans related to “America First” or “Make America Great Again.”

By adopting the stock symbol DJT, Trump Media harkens back to one of Trump’s previous publicly traded companies, Trump Hotels and Casino Resorts, which used the same symbol until its bankruptcy filing in 2004.

The merger between Digital World and Trump Media, proposed in October 2021, is one of the notable deals resulting from the popular trend during the pandemic of special purpose acquisition companies (SPACs) going public. SPACs are investment vehicles established to raise funds through initial public offerings and subsequently acquire operating businesses.

By going public through a SPAC merger, Trump Media follows the footsteps of other alt-right businesses like Rumble, an online video streaming service catering to right-leaning media personalities, and PublicSquare, an online marketplace for the “patriotic parallel economy.”

During the first nine months of the previous year, Truth Social generated only $3.3 million in advertising revenue, while Trump Media incurred a net loss of $49 million. Building a broader advertiser base appears to be a challenge, as there seems to be a limit to growth in these niche markets, according to Shannon McGregor, a journalism and media professor at the University of North Carolina.

The merger faced obstacles when the Securities and Exchange Commission (SEC) initiated an investigation intoTitle: Donald Trump’s Media Merger Bolsters Wealth and Offers Cash Potential

Donald Trump’s social media company has completed a merger with a cash-rich shell company, which, if approved, will significantly increase his wealth and provide a potential cash source to address his mounting legal bills.

The merger combines Trump’s social media company, including Truth Social, his preferred communication platform, to establish a public company. It is expected to boost Trump’s wealth by billions of dollars and potentially assist in covering his growing legal expenses.

With an estimated stake valued at over $3 billion in the merged company, Trump can explore options to raise cash based on his ownership value. Upon its Wall Street debut, Trump Media & Technology Group is projected to have a market value of around $5 billion, considering the $37 share price of its merger partner, Digital World Acquisition Corp. As Trump owns over 60 percent of the company, his net worth will instantly double from the $2.6 billion estimated by Forbes in October.

However, the merger agreement imposes restrictions on major shareholders, preventing them from selling shares or using them as collateral for loans for at least six months. While these restrictions may initially limit Trump’s ability to convert gains into cash, his significant control over Trump Media and influence on the new board through his allies could potentially lead to the waiver of these restrictions.

The urgency to access cash stems from Trump’s significant legal liabilities, including a $454 million penalty in a civil fraud case imposed by the New York State attorney general. Failing to cover this penalty while appealing the ruling could result in the seizure of Trump’s properties by the attorney general’s office.

Although the board of Trump Media may be cautious about early share sales that could reduce the company’s stock price, they may consider lifting the restriction on using shares as collateral to help Trump secure a bond while minimizing negative effects on the stock value.

Prior to the merger, Trump held the position of chairman in Trump Media, although it remains unclear if he will retain this title. Nevertheless, Trump’s substantial ownership and the presence of his son, Donald Trump Jr., and former administration members on the new board solidify his significant influence over the company. With controlling ownership of 79 million shares, Trump’s majority stake is crucial to the success of Truth Social, his primary platform for engaging with supporters.

The value of Trump Media’s stock is subject to fluctuations over time, and if the share price declines in the future, the significant increase in Trump’s net worth may diminish. Following the shareholder vote approving the merger, Digital World’s shares experienced a 14 percent drop.

As part of the merger, investors in the cash-rich shell company, Digital World, will become shareholders of Trump Media. The deal involves transferring over $300 million from Digital World to Trump Media, which has faced challenges in generating substantial revenue. This arrangement ensures the continuity of Truth Social’s operations.

The shares of Trump Media may begin trading on the stock market as early as Monday, using the stock symbol DJT.

Digital World’s shareholders, many of whom are ordinary investors and Trump supporters, have played a significant role in sustaining the company’s shares. However, it remains uncertain if they will retain their stock now that the merger is finalized.

Through this merger, Trump Media aims to enhance and expand Truth Social, which is expected to become a major revenue source for Trump. Given the uncertainty surrounding Trump’s real estate business due to the civil fraud case ruling, Trump Media may become one of his primary income streams. Truth Social primarily generates revenue from advertising by upstart companies targeting Trump’s supporters, utilizing slogans related to “America First” or “Make America Great Again.”

By adopting the stock symbol DJT, Trump Media draws a parallel to one of Trump’s previous publicly traded companies, Trump Hotels and Casino Resorts, which used the same symbol until its bankruptcy filing in 2004.

The merger between Digital World and Trump Media, first proposed in October 2021, is part of a trend where special purpose acquisition companies (SPACs) go public. SPACs are investment vehicles established to raise funds through initial public offerings and subsequently acquire operating businesses.

By going public through a SPAC merger, Trump Media follows the path of other alt-right businesses like Rumble, an online video streaming service catering to right-leaning media personalities, and PublicSquare, an online marketplace for the “patriotic parallel economy.”

During the first nine months of the previous year, Truth Social generated only $3.3 million in advertising revenue, while Trump Media incurred a net loss of $49 million. Building a broader advertiser base presents a challenge, as niche markets like these have limits to growth, according to Shannon McGregor, a journalism and media professor at the University of North Carolina.

The merger faced obstacles when the Securities and Exchange Commission (SEC) initiated an investigation into certain aspects of the deal. However, with the completion of the merger, Trump Media is now focused on leveraging its new public status to enhance its platform and expand its reach.

Source: Newyork Times

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