Investors gave their approval on Friday for the public offering of Donald Trump’s Truth Social platform, resulting in an estimated paper wealth of $3 billion for the former president. Trump Media & Technology, the company behind his fledgling social network Truth Social, has been striving for years to enter the stock market through a “blank check” merger with a dormant company.
This effort finally succeeded on Friday morning after a shareholder vote in Digital World Acquisition, the entity Trump’s business aimed to merge with. Despite Trump Media’s struggles since the lackluster launch of Truth Social, which has only generated around $5 million in sales since 2021, Trump’s supporters rallied to drive up shares in Digital World, pushing its value to approximately $6 billion, a surge of about 145% since the beginning of the year.
Before the announcement, Digital World’s stock price stood at $44, implying a debut value of over $5 billion for the new company. Trump’s ownership in the merged business amounts to 79 million shares, translating to a paper stake of roughly $3 billion. However, he won’t be able to liquidate this stake immediately, as major shareholders are prohibited from selling stock for six months post-merger. Trading in Digital World has been highly volatile, with shares plunging nearly 14% after Friday’s vote, raising concerns about Trump Media’s performance on the stock market before Trump can offload any of his stake.
This development occurs amidst financial challenges for Trump, who is seeking to reclaim the presidency from Joe Biden in the upcoming elections. Last month, a New York judge ordered him to pay $454 million in a civil fraud case, a task his lawyers warned might be practically impossible after being rejected by 30 surety companies. The deadline for payment is Monday.
Digital World has increasingly been viewed as a “meme stock,” buoyed by internet memes, including those posted on platforms like Truth Social, encouraging retail investors to invest in it. The shell company initially announced plans to merge with Trump’s digital media firm in 2021 but faced several legal obstacles along the way.
Special purpose acquisition companies (Spacs) like Digital World raise funds from investors through initial public offerings, then typically seek a company to take public. Once a Spac identifies and agrees on terms with a target, it merges with the business and takes it public, allowing investors in both companies to participate. However, if the original investors in the Spac disapprove of the deal, they can withdraw their funds.
Julian Klymochko, founder and CEO of a Spac-focused fund at Accelerate Financial Technologies, remarked that the rise in Digital World’s stock price was not attributed to its underlying fundamentals. Truth Social, he stated, hasn’t gained significant traction and is currently more of a meme stock, essentially a wager on the likelihood of Trump winning the election. Klymochko pointed out that Digital World’s shares surged 88% on January 22 when Ron DeSantis, the governor of Florida, withdrew from the Republican presidential candidate race.
