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Trump Media, the owners of the social media platform Truth Social, is about the become a publicly listed company, as it is due to be acquired by Digital World Acquisition Corp after a shareholder vote on Friday. Trump will have at least a 58% stake in the merged company, worth almost $3 billion.
Digital World, or DWAC (pronounced D-whack), is what is known as a SPAC, or a shell business created expressly to buy another firm and take it public.
Shares in Digital World dropped more than 13% after Friday’s approval, ending the day at $36.94, but the company’s backers, many of whom are apparently fans of the ex-President, are not bothered.
A supporter of the deal, Chad Nedohin, said “This is just the start,” on his Rumble video show DWAC Live. “There’s no reason to freak out.”
The company will be renamed Trump Media & Technology Group and could start trading on the Nasdaq stock exchange under the ticker DJT as soon as next week.
Trump will be barred from selling or transferring his shares for at least six months, so this may not resolve his current financial issues relating to the penalty due from his New York court case. However, the company could grant him an exemption, or he could try to obtain a loan backed by the value of the shares.
There are red flags over the Digital World deal, including unresolved lawsuits from former business partners, and an $18 million settlement that DWAC agreed to pay last year in order to resolve fraud charges over the way the merger plan came together.
There is a significant risk that Digital World shareholders could lose money on their investment, according to analysts. Share prices have slid down from the highs they reached in 2021 when the plans to purchase Trump Media were first announced. However, the deal still implies that Trump Media has a value of almost $5 billion, which is a large sum given that it brought in just $3.3 million in revenue in the first nine months of last year and lost almost $50 million.
Trump Media will get a cash influx of over $200 million which could be used for growth and expansion.
Analysts described Digital World as a prime example of a “meme stock” where the share price bears no relation to the company’s fundamentals, and is almost certainly going to fall eventually.
“With Trump Media, I expect that it will collapse but whether it’s going to occur a week from now or two years from now and how rapidly… those things are really difficult to predict,” said University of Florida finance professor Jay Ritter, who tracks public listings.
Marco Iachini, senior vice-president of research at Vanda Securities, said individual investors piled into Digital World stock after the Trump deal was announced, and then again after he won the Iowa primary in January.
What the motivation for buyers, the main beneficiary of the deal is going to be Trump. “It’s an enormous transfer of value from [investors]… to Trump, which stands to be extremely lucrative for him,” says Michael Ohlrogge, a law professor at New York University who has studied listings of companies such as Trump Media.
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