During a period of extreme financial and legal stress, former President Donald Trump is about to receive a substantial financial benefit, maybe worth billions. Overcoming years of legal and regulatory obstacles, Trump Media & Technology Group, the parent business of Trump's failing social media platform, Truth Social, is set to go public as early as next week. With shares worth more than $3 billion based on current market values, Trump may become the majority owner in a publicly traded firm if shareholders accept the merger of Trump Media with a special purpose acquisition company (SPAC) on Friday.
Though if it is allowed, industry analysts contend that there are a number of logistical, financial, and legal issues that make it doubtful that this agreement could ease Trump's approaching financial crisis. "President Trump won't be able to cash in on that stake immediately," said Renaissance Capital senior IPO market strategist Matthew Kennedy. A civil fraud case against Trump in New York has a deadline of Monday to post a $464 million bail.
His private estate north of Manhattan and golf course, among other assets, may be taken by the state's attorney general if he doesn't. One bright spot for Trump is the substantial incentives for shareholders to approve the combination with Digital World Acquisition Corp. Trump could own a minimum of 58.1% of the company if approved, according to the documents. Trump would possess about 79 million shares of the new public business, with the possibility of millions more if specific goals are achieved, according to the merger deal.
At least theoretically, that sizable holding could be worth $3.4 billion given Digital World's current share price of about $43. The combination might be completed quickly. The firms want to conclude the merger two business days after the shareholder vote approval, according to regulatory filings. Although it might take longer, Kennedy says, this could allow trading under the new name and ticker symbol by Tuesday or Wednesday. That stake isn't as liquid as it seems, though. Trump might find it very difficult to turn these financial riches into real money.
Actually, according to Cornell Law School law expert Charles Whitehead, Trump's stakes in this corporation might be even less liquid than his real estate holdings. First, according to analysts, Trump Media is being massively overvalued by the market given its fundamentals. Trump might find it tough to sell the stock or utilize it as security as a result. As Yale law professor Jonathan Macey said, "The stock price is obviously a bubble." If the stock had to be held for any period of time, no sane investor would take it at face value. According to SEC filings, Trump Media lost $26 million in the third quarter on revenue of just $1.1 million. In addition, Truth Social seems to be losing users.
Similarweb statistics shows that there have been a 39% drop in Truth Social's US monthly active users on iOS and Android year over year. Truth Social continues to be far smaller than X (formerly Twitter), which is declining as well, just more slowly. University of Florida finance professor Jay Ritter said that it is hard, if not impossible, to defend the going market price. It is wildly overpriced, Ritter said.
It is a meme stock, meaning its price is unrelated to its intrinsic worth.Typically, meme stock purchasers purchase on the bigger fool principle of investing: "It is overvalued today, but I hope to make money selling it to an even greater fool tomorrow at an even higher price." Even still, analysts contend that Trump is probably not allowed to sell or promise those shares right away.