Helen Coster, Svea Herbst-Bayliss
(Reuters) – Former U.S. President Donald Trump on Friday moved a step closer to making a big profit from his social media company after investors in the letterhead company approved a merger now valued at about $5.7 billion. .
The deal values Trump’s majority stake in the company that owns his app, Truth Social, at about $3.3 billion. That windfall could prove vital as Trump faces the financial fallout from a series of lawsuits against him, including a $454 million civil fraud judgment in New York.
Shareholders of Digital World Acquisition Corp (DWAC), the special purpose acquisition company (SPAC) that plans to take Trump Media & Technology Group public through a merger, voted in favor of the deal on Friday.
While the next step is to complete the deal next week, its future is fraught with uncertainty. Former Digital World CEO Patrick Orlando and former Trump business partners Andy Litinsky and Wes Moss filed a separate lawsuit asking for additional shares for their previous work on the deal.
It is unclear how or when these cases will be resolved. Even if the deal is completed next week, Trump will not be allowed to sell any of his shares in the combined company for six months or borrow against them on the terms he previously agreed to.
The deal is also set to provide a vital US$300 million infusion to Truth Social’s parent company Trump Media & Technology Group (TMTG). The social media company lost $10.6 million from its operations in the first nine months of 2023 on revenue of $3.4 million. It financed itself by borrowing US$40.7 million through convertible notes that can be repaid in shares.
Based on how Digital World’s shares have recently traded, TMTG would be valued at US$5.7 billion upon its merger with Digital World on a non-diluted basis and US$8.6 billion on a fully diluted basis including exercisable warrants , and profit. shares to be issued.
Thanks to a rally fueled by Trump supporters and other retail investors, Digital World’s shares have nearly quadrupled since announcing its 2021 partnership with TMTG.
Buying the stock “will help President Trump get his bonds, everyone buying 4 shares will benefit everyone,” Truth Social user @racinrob wrote in a post this week.
Digital World shares fell more than 10% on Friday after shareholders approved the deal.
The combined company’s fully diluted $8.6 billion valuation would be just under half the value of Elon Musk’s much more popular social network X.
In February, Digital World reported that Truth Social currently had 8.9 million people registered. X, by comparison, has more than half a billion monthly users, Musk said.
Trump has 6.7 million followers on Truth Social, compared to the more than 88 million followers he had on X when the platform finally banned him and the 87.4 million followers he now has on that platform.
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Trump, who is running again for the US presidency, will own between 58.1% and 69.4% of the combined company, depending on the extent to which investors support the deal.
TMTG was launched with the help of Litinsky and Moss – two former contestants on Trump’s reality show “The Apprentice” – as a way for Trump to connect with his supporters after Facebook (NASDAQ:), Twitter and YouTube removed him following the January incident. December 6, 2021 attack on the US Capitol.
The deal has faced setbacks and delays since 2021. Digital World was the target of investigations by the U.S. Department of Justice and the Securities and Exchange Commission (SEC), which ousted Orlando as chief executive and shook up its board of directors.
In July, Digital World reached an $18 million settlement with the SEC, which said Digital World misled investors by failing to disclose in filings that it had formulated a plan to acquire TMTG and was pursuing that acquisition prior to Digital World’s initial public offering.
In August, Trump posted a photo of himself on X from his cell at the Fulton County Jail in Georgia. He hasn’t posted on X since, using Truth Social as his primary platform to reach voters.