Former President Donald Trump just scored a huge legal and financial win on Friday according to reports.
Trump stands to reap a massive financial windfall — potentially worth $3.5 billion or more as shareholders — of the Digital World Acquisition Corp (DWAC) voted on Friday to approve a merger with his Trump Media & Technology Group.
The shareholder approval paves the way for Trump’s fledgling Truth Social media platform to soon become a publicly traded company.
By combining with DWAC, a special purpose acquisition company (SPAC) designed to take private firms public, Trump Media will gain a stock market listing without the traditional IPO process.
Under the agreed merger terms, Trump will control a whopping 58% equity stake in the newly formed Trump Media & Technology Group Corp, which translates to around 78.8 million shares based on DWAC’s current share count.
At the SPAC’s present stock price, that ownership position could be valued at approximately $3.5 billion on paper – a huge win considering the massive financial fines Trump is facing in New York.
However, Trump and other major shareholders face restrictions on cashing in that new found wealth.
A so-called “lock-up” provision bars the former president from selling, lending, donating, or otherwise cashing out his shares for at least the first six months after the merger concludes.
Such lock-up periods are commonplace for major stakeholders in newly public companies, designed to prevent sudden, destabilizing sell-offs that could crater the stock price out of the gates.
But it also temporarily hamstrings Trump’s ability to readily access those billions, even as he confronts mounting legal fees and financial pressures.
Trump’s legal team claims the former president has been unable to post a required $450+ million bond to appeal a massive civil fraud judgment in New York.
Without that bond payment by Monday, March 25th, the state may initiate seizing Trump’s properties and assets to recover the penalty amount.
So while the Truth Social merger stands to mint Trump as a multi-billionaire yet again, he cannot immediately tap that equity to solve his financial strains.
And analysts say any attempts to swiftly liquidate his entire DWAC stake once the lock-up expires could destabilize the stock anyway.
“As soon as people know he’s gonna sell the stock, they’re gonna want to sell the stock, and the stock is going to crater,” cautioned Northwestern University professor Harry Kraemer.
Beyond the lock-up constraints, the long-term viability of Trump’s truth Social investment remains an open question. The platform trails far behind established players like Facebook and Twitter (now X) in both user base and advertising revenue.
Truth Social booked just $3.7 million in revenue over the first nine months of 2023 while racking up significant operating losses, leading some experts to question whether the company can sustain valuations in the billions based on its lackluster financials and uncertain growth prospects.
The Horn editorial team