- Trump scrambles to pay $464m sanction, eyes stock market aid
- Digital World’s shareholder vote pushes Trump Media toward public trading
- Skepticism surrounds Trump Media’s value amid legal, financial challenges
It appears that Donald Trump is in a financial bind, scrambling to pay a $464 million (£365 million) fraud sanction. Might the stock market be able to save him?
Trump Media, the operator of the social media platform Truth Social, is on the verge of becoming a publicly traded organisation following Friday’s majority vote of Digital World Acquisition Corp shareholders to acquire it.
Mr. Trump is anticipated to own a minimum of 58% of the amalgamated company, which is valued at approximately $3 billion at the current share prices of Digital World.
It is an extraordinary potential financial gain for Mr. Trump in return for a company whose auditor issued a warning last year regarding its imminent failure.
Disregard the numerous concerns linked to the transaction, such as pending legal disputes stemming from former business associates. Digital World also consented to pay a $18 million settlement last year to resolve fraud charges related to the merger plan’s development.
Following the approval, Digital World shares declined by over 13% on Friday, closing the day at $36.94.
The overwhelming majority of Digital World’s backers are individual investors as opposed to Wall Street firms, and many of them appear to be Trump allies. These investors appeared unfazed.
Chad Nedohin, an advocate for the agreement, stated on his programme DWAC Live on the video platform Rumble after the announcement of the approval, “This is merely the beginning.” “There’s no reason to freak out.”
Digital World, or DWAC (pronounced D-whack), is an example of a SPAC, which is a private company formed for the sole purpose of acquiring and going public another company.
As of next week, the organisation that was previously known as Trump Media & Technology Group may begin trading on the Nasdaq stock exchange under the symbol DJT.
It is unlikely that the agreement will resolve Mr. Trump’s most pressing financial issues, such as his New York fraud penalty, immediately.
For a minimum of six months, the former president is prohibited from selling or transferring his shares; however, the new company may be able to exempt him.
Additionally, Mr. Trump might attempt to obtain a loan secured by the value of the shares. In this instance, however, analysts predict that a bank would likely lend him considerably less than the paper value of the shares, due to the business’s inherent hazards.
Even so, some of his supporters remain optimistic that their support will prove beneficial.
Mr. Nedohin, who goes by the alias Captain DWAC on Truth Social and self-identifies as a Canadian “worship leader” on his website, declined an interview.
However, he urged investors to approve the transaction on his programme this week, speculating that it might aid the former president in his legal battles.
“Who knows? “If the merger is finalised on Friday at 10 a.m. and Trump suddenly owns… DJT shares worth three, four, or five $10 billion. He stated, “He could easily use that as leverage to obtain a loan.”
Putting your money where your mouth is in support of free speech to save your country at the risk of losing everything, he continued.
Analysts estimate that the possibility that Digital World shareholders will incur a financial loss on their investment is substantial.
The share prices have declined since the peak they attained after the declaration of intentions to acquire Trump Media in 2021.
However, despite the decline on Friday, they continue to suggest that Trump Media is worth nearly $5 billion, which is quite a bit considering its revenue of only $3.3 million in the first nine months of last year and its loss of nearly $50 million.
The merger will furnish Trump Media with an infusion of over $200 million in capital, which the company may allocate towards expansion and progress.
However, Truth Social, which debuted to the public in 2022 with the intention of challenging established social media platforms such as Twitter and Facebook, is still in its infancy at this time.
According to regulatory filings, Trump Media cautions potential investors that it does not monitor user growth or engagement metrics, which could provide insight into its operations, despite boasting approximately 8.9 million sign-ups. Moreover, it states that it has little intent of doing so.
External firms approximate that Truth Social garnered five million visits during February. In contrast, Elon Musk’s X, which was formerly Twitter and was recently valued at approximately $14 billion by one investor, garnered more than 100 million visits.
Digital World, according to analysts, is a prime example of a “meme stock” in which the share price is disconnected from the fundamentals of the company and is almost certain to decline in the future.
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“With Trump Media, I anticipate that it will collapse, but whether it will occur in a week or two years and how quickly it will do so is extremely difficult to predict,” said Jay Ritter, a finance professor at the University of Florida who monitors public listings.
Individual investors flooded into Digital World stock, according to Marco Iachini, senior vice president of research at Vanda Securities, after the Trump agreement was announced and again in January, after he won the Iowa primary.
He stated that there had been less activity before this week’s voting, suggesting that professional firms may be the ones driving the trading.
Mr Trump, whose primary contributions to Trump Media have been his name and posts on the platform, seems poised to benefit the most from whatever is motivating purchasers.
It is a tremendous transfer of value from [investors] to Trump, which has the potential to be exceedingly profitable for him, according to Michael Ohlrogge, a New York University law professor who has researched the listings of companies including Trump Media.
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