Trump Media, the entity behind the social media platform Truth Social, is on the brink of becoming a publicly traded company following the approval of a majority of shareholders of Digital World Acquisition Corp on Friday. As a result of this acquisition, former President Donald Trump is anticipated to hold a stake of at least 58% in the merged company, representing a valuation nearing $3 billion based on Digital World’s current share prices.
While this development promises substantial financial gains for Trump, concerns linger regarding the stability and integrity of the business. Truth Social’s own auditor raised alarms last year, cautioning about its vulnerability to failure. Additionally, unresolved legal disputes with former business partners and an $18 million settlement over fraud charges related to the merger process cast shadows over the deal’s legitimacy.
Despite these red flags, shareholders of Digital World, predominantly individual investors purportedly aligned with Trump, remain undeterred. Chad Nedohin, a vocal supporter of the deal, expressed optimism on his show DWAC Live, dismissing concerns and emphasizing the potential for further growth.
Digital World, known as a Special Purpose Acquisition Company (SPAC), functions as a shell entity created specifically for acquiring and taking another firm public. Under the proposed merger, the company will be rebranded as Trump Media & Technology Group and could commence trading on the Nasdaq stock exchange as early as next week under the ticker symbol DJT.
However, the merger does not immediately resolve Trump’s ongoing financial challenges, including penalties related to a New York fraud investigation. Restrictions prevent him from selling or transferring his shares for at least six months, although exceptions may be granted by the new company. Trump could explore securing a loan backed by the shares’ value, albeit with potential limitations due to the business’s inherent risks.
Supporters of the merger, like Nedohin, view their investment as a strategic move, potentially aiding Trump in his legal battles. Despite the risks, optimism prevails among backers, who hope to see significant returns on their investment.
Analysts caution that Digital World’s status as a “meme stock” indicates a detachment between its share price and fundamental business metrics, making it susceptible to eventual decline. Trump Media’s revenue, though modest, is juxtaposed against its lofty valuation, raising concerns about its long-term sustainability.
Despite these challenges, the merger promises a cash infusion of over $200 million to Trump Media, facilitating potential expansion efforts. However, Truth Social’s current size remains relatively small compared to established social media platforms, with limited transparency regarding user engagement metrics.
As the merger progresses, market observers remain divided on its long-term viability. While some anticipate imminent collapse, others acknowledge the unpredictability surrounding such ventures. Regardless, Trump stands to benefit substantially from the transaction, marking a significant transfer of value from investors to the former president.
