It is possible for Trump to make $3.5 billion if Truth Social becomes a publicly traded company, but accessing the funds may pose challenges.
Ex-President Donald Trump may be in line to receive a significant sum of $3.5 billion, as shareholders of a company that partners with Trump’s media and technology group have voted to merge.
On Friday morning, the shareholder vote was livestreamed, confirming the approval. Digital World Acquisition Corp., a company known as a “blank check” company, saw a 5.5% increase in their shares during the morning trading session as they prepare to merge with Trump’s media group.
With Digital World Acquisition Corp. (DWAC) shareholders’ approval of the deal, the businesses could soon combine, putting the former president’s Truth Social social media platform on the stock market. Trump created Truth Social as a conservative-focused social media service after he was banned from Twitter
Formerly referred to as Y, X and various other websites have been swiftly monitored and regulated in the aftermath of the riot on January 6th.
Donald Trump is facing difficulties in obtaining a $464 million bond for a civil fraud case.
Donald Trump could potentially greatly increase his wealth from the upcoming agreement as he possesses 78.8 million shares of the newly combined corporation, which is equivalent to 58% of the company. With the current stock value of DWAC, this ownership could potentially be valued at $3.5 billion.
Some of DWAC’s shareholders appear to be Trump followers, as one group on Truth Social includes more than 7,850 users who have been communicating about the stock and its prospects. That raises the possibility that DWAC’s shares are currently getting a lift from Trump’s supporters at a time when Trump is moving closer to securing the GOP nomination for president.
That windfall could land in Trump’s lap at a time when his financial pressures are ratcheting up. For one, Trump’s lawyers have said he’s been unable to secure a bond
In a civil fraud case, Trump has been ordered to pay over $460 million. If he is unable to pay by March 25, the state of New York may seize his property to cover the amount.
brought in additional revenue totaling $82 million
Unfortunately, Trump is currently dealing with expensive legal fees from various court cases, with over $8.5 million in expenses just for 2024. In addition, his political action committees generated an extra $82 million in revenue last year.”
exceeded its revenue”
Partly due to the president incurring over $50 million in legal fees for his ongoing legal defense.
But while a $3.5 billion stake in a publicly traded company could help relieve some of those financial pressures, it’s unlikely to immediately help Trump. That’s because he and other big shareholders are subject to a so-called “lock-up” provision that bars him from selling his stock for at least six months.
Here is the information you should be aware of.
What is preventing Trump from selling his ownership in Trump Media right away?
This is a result of a lock-up provision that applies to significant shareholders, as stated in the DWAC regulatory filing.
Lock-up provisions are a common restriction on Wall Street designed to keep big investors from dumping their shares in a company soon after the company goes public. If they were to occur, such large stock sales could cause a company’s shares to tank.
It is unlikely that Trump will have the option to use his stocks for a loan. This is due to the conditions outlined in the DWAC regulatory filing, which prohibits founding investors from selling, lending, donating, or using their shares as collateral for six months after the deal is finalized.
Legal analysts suggest that the term “encumber” holds significant weight and could potentially hinder Trump from utilizing the stock as collateral for fundraising purposes until at least six months have passed.
He is looking less likely
Is it possible for Trump to make a sale before the lock-up period ends? It appears increasingly unlikely.
Digital World may potentially choose to forgo the lock-up agreement prior to the completion of the transaction. Alternatively, according to legal professionals, it is more probable that the board of the new company would modify the lock-up agreement following the closing of the deal.
The new board’s choice could potentially expose the directors to legal inspection, but they must demonstrate that their actions are for the benefit of shareholders.
Is it possible for Trump to sell his stock after the six-month period ends?
Normally, large shareholders do not sell all of their shares at once due to the negative impact it could have on other investors’ confidence in the company’s stability. It could also result in an excess of available shares on the market, causing a decrease in the company’s stock value.
Large investors and creators of a company typically distribute their stocks gradually in smaller portions to prevent causing volatility in the stock value.
Can we truly value Trump’s holding at $3.5 billion?
The calculation uses the current market value of DWAC and the amount of shares that Trump will have following the completion of the merger.
However, all investments available for public trading carry inherent risks, such as the potential for a decrease in share worth. Once publicly traded, the Trump Media Group may be subject to increased examination from a larger group of investors who may not perceive its value in the same way as the current shareholders of DWAC.
In the immediate future, if a considerable number of individuals declare, “I am not concerned about its value, I will continue to purchase and support it,” this can be sustained for a reasonable amount of time,” stated Harry Kraemer, a professor who specializes in mergers and acquisitions at Northwestern University’s Kellogg School of Management. He further commented that this behavior goes against economic principles, but it is still occurring.
One major component of the Trump Media Group is Truth Social. However, when compared to popular social media sites like Facebook and Instagram, Truth Social is significantly behind in terms of both its user base and advertising revenue. The platform is saturated with ads promoting fake medical remedies, merchandise related to Trump, and businesses aligned with right-wing ideologies.
In a recent filing with regulatory authorities, it was reported that Trump Media generated $3.7 million in revenue during the first nine months of 2023. However, experts have expressed concerns about the company’s financial health, as it is expected to continue experiencing significant losses. If the company is unable to increase its revenue or become profitable in a timely manner, it may struggle to maintain its high valuation.
According to Kraemer, it is difficult to fathom that this company’s long-term economic worth could reach billions, considering their sales were under $5 million last year and they are facing substantial financial losses. Therefore, discussing a valuation in the billions is nonsensical from an economic perspective.
Trump could potentially face consequences if he decides to sell his stock after the lock-up provision has expired. This could lead to a decrease in stock value, resulting in a loss for him if he holds a significant amount. This could also happen at a crucial time when he may require additional funds for legal expenses or his political campaigns.
Kraemer predicted that once word gets out that he plans to sell the stock, others will follow suit, causing the stock to take a significant dive.
The report was supplemented by The Associated Press.
Aimee Picchi
Source: cbsnews.com