Investors approve Donald Trump’s $5.7 billion social media deal

Former U.S. President Donald Trump moved closer to a big windfall from his social media company on Friday after investors in a blank-check acquisition company approved a merger now worth 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. The windfall could be crucial as Trump grapples with the financial fallout from a series of legal cases against him, including a $454 million verdict in a New York civil fraud case.

Digital World Acquisition Corp (DWAC), a special purpose acquisition company (SPAC) that plans to take Trump Media and Technology Group public on the stock market through a merger, voted in favor of the deal on Friday.

While the next step is for the deal to close next week, its future is uncertain. Former Digital World CEO Patrick Orlando and former Trump business associates Andy Litinsky and Wes Moss have each filed lawsuits seeking damages over their previous work. Gain more shares for the work done in the deal.

It’s unclear how and when the cases will be resolved. Even if the deal closes next week, under the terms he previously agreed to, Trump will not be able to sell any of his shares in the combined company for six months or borrow against them.

The deal will also provide a significant cash infusion of $300 million to Trump Media Technology Group, the parent company of Truth Social. The social media company lost $10.6 million from operations in the first nine months of 2023 on revenue of $3.4 million. The company has been borrowing $40.7 million to finance itself through convertible promissory notes that can be repaid with stock.

U.S. stocks closed mostly lower on Friday, but the S&P 500 posted its biggest weekly percentage gain of 2024.

Based on recent trading in Digital World stock, a merger between TMTG and Digital World would be valued at up to $5.7 billion on an undiluted basis and up to $8.6 billion on a fully diluted basis (taking into account the options to be exercised). Equity warrants and income shares to be issued.

Driven by Trump supporters and other retail investors, Digital World’s shares have nearly quadrupled since it announced a partnership with the Trump media and technology group in 2021.

Truth Social user @racinrob wrote in a post this week that buying the stock “will help President Trump get his bonds and everyone buying 4 shares will benefit everyone.”

Digital World’s shares plunged more than 10% on Friday after the deal was approved by shareholders.

The combined company would have a fully diluted valuation of $8.6 billion, just under half of Elon Musk’s more popular social media company X.

In February, Digital World said Truth Social had 8.9 million registered users to date. By comparison, X has more than 500 million monthly users, according to Musk.

Trump had 6.7 million followers on Truth Social and had more than 88 million followers on X when the platform permanently banned him, and he currently has 87.4 million followers on the platform.

transaction barriers

Trump, who is running for president again, will own between 58.1% and 69.4% of the combined company, depending on investor support for the deal.

The Trump Media and Technology Group was formed with the help of Litinsky and Moss, two former contestants on Trump’s reality show “The Apprentice,” as part of Trump’s efforts to remove special features from Facebook, Twitter and YouTube. A way to connect with supporters post-Trump. There was an attack on the U.S. Capitol on January 6, 2021.

The deal has faced setbacks and delays since 2021. Digital World has become the target of investigations by the U.S. Department of Justice and the Securities and Exchange Commission (SEC), ousting Orlando’s CEO and revamping its board of directors.

In July this year, Digital World reached an $18 million settlement with the SEC, which claimed that Digital World misled investors by failing to disclose in documents that it had formulated plans to acquire TMTG and was seeking an acquisition ahead of Digital World’s initial public offering.

In August, Trump posted a photo on X from his booking at the Fulton County Jail in Georgia. He has not posted on X since, instead using Truth Social as his primary platform to reach voters.