Donald Trump stands to potentially increase his wealth by approximately $3.4 billion (£2.7 billion) if shareholders approve the plan to take Trump Media public.
The former US president is gearing up to list his Trump Media & Technology Group, which operates the Truth Social tech platform, through a merger with a special purpose acquisition company (Spac) called Digital World Acquisition.
The vote on the merger is scheduled for Friday, although complications have arisen as Digital World has filed a lawsuit against sponsor ARC Global Investments, which is attempting to delay the deal.
Should the merger proceed and Trump Media become publicly traded, Trump’s potential gains would not be immediately accessible. A provision in the merger agreement prevents major shareholders from selling their stock for six months.
Trump’s financial situation is tense as he prepares for a potential second presidential bid against incumbent Joe Biden. He recently faced a court order to pay $454 million in a civil fraud case related to alleged property valuation manipulation for favorable loan and insurance rates.
Trump has contested the ruling, describing it as a “witch-hunt,” and plans to appeal. Moreover, he faces a deadline to secure a bond against his assets to guarantee payment of the $454 million, but his efforts have been hampered by refusals from 30 surety companies.
Spacs typically raise funds through an initial public offering (IPO) and then acquire or merge with an existing company – in this instance, Trump Media. The resulting entity will bear a stock market ticker symbol based on Trump’s initials, DJT.
After the merger, Trump would hold nearly 79 million shares in the company. Based on Digital World’s closing share price of $42.90 on Wednesday, Trump’s stake in the merged entity would be valued at around $3.4 billion.
However, the realization of this potential windfall hinges on Trump Media maintaining its share price post-IPO, despite its relatively modest financial performance. Financial disclosures from last year revealed that Trump Media incurred losses of $31.6 million since its launch in 2021, with sales of less than $5 million.
Trump asserts that he is worth several billion dollars, citing around $400 million in liquid assets and additional wealth tied up in properties and other investments.
Digital World’s shares have surged by 145% this year, driven by its status as a “meme stock” – a term referring to equities boosted by internet memes, in Digital World’s case, promoted on platforms like Truth Social and Reddit, encouraging retail investors to buy into it.
Julian Klymochko, CEO of Accelerate Financial Technologies, noted that Digital World’s stock performance is heavily influenced by the likelihood of Trump winning another election. The stock saw a surge in January when Ron DeSantis withdrew from the race. Klymochko emphasized that Digital World’s valuation is not based on traditional fundamentals but rather on speculation regarding Trump’s electoral prospects.
The merger agreement includes a standard provision preventing “founder share” owners like Trump from selling their stock until six months after the completion of the deal, aiming to prevent a flood of shares on the market that could depress their price following the listing.
