Donald Trump to make $3bn if shareholders back plan to float Trump Media
Source: The Guardian
Thu 21 Mar 2024 08.19 EDT
Donald Trumps wealth is set to increase by more than $3bn (£2.35bn) if a shareholder vote on Friday paves the way for the float of his Trump Media business. The former US president is preparing to list Trump Media & Technology Group, which operates the Truth Social tech platform, via a merger with a special purpose acquisition company, or Spac.
The Spac, called Digital World Acquisition, has scheduled a vote on the merger with Trump Media for Friday. However, there are complications around the planned vote after Digital World sued sponsor ARC Global Investments, which is trying to delay the deal, to back the merger.
If the merger goes ahead and Trump Media goes public as soon as next week, the presumptive Republican presidential nominee would not be able to cash in immediately, however. Trump would need a waiver to circumvent a provision that blocks major shareholders from selling stock for six months.
Trumps finances are under pressure as he prepares to contest the US presidency with incumbent Joe Biden for a second time. Last month Trump was formally ordered by a New York judge to pay $454m following a civil fraud case, in which the former president was found to have manipulated the value of his properties to obtain advantageous loan and insurance rates.
Read more: https://www.theguardian.com/us-news/2024/mar/21/donald-trump-wealth-to-rise-by-more-than-3bn-if-shareholders-back-plan
ashredux
(2,606 posts)Irish_Dem
(47,114 posts)They own him now.
pwb
(11,275 posts)Invest now, be the first to feel the con.
tulipsandroses
(5,124 posts)Want to be a part of this. Even if you dont care that hes a racist wannabe dictator, I doubt this will be profitable if he loses. I doubt it will be profitable period.
Eyeball_Kid
(7,432 posts)Why the "investors" don't recognize this con is beyond reason. Trump is a total bad faith negotiator. He will stiff everybody and anybody. Anything associated with Trump is a bust. No wonder there is resistance to making this deal.
FailureToCommunicate
(14,014 posts)concern?
Novara
(5,842 posts)Lawsuits will tie this up for a while. Also, usually with mergers, there's a 6-month hold on selling shares once the deal is done. So he won't be able to liquidate his shares, unless this is waived, even without lawsuits locking up everything. And why in hell would they waive it when they know damn well he's going to strip the company for parts? Also? If they waive it and he immediately sells, it could affect the stock value, which is already at a low.
Given the lawsuits (something about Felonious Fuckface making a power grab), I don't know why anyone would take the risk to merge with anything he touches. Everything he touches, dies.
bluestarone
(16,959 posts)The person assigned to monitor TFG's accounts. Who is this person, and how many people are helping this monitor? Will we ever know?
Brother Buzz
(36,440 posts)She's been doing the task for quite some time, but just got assigned for an official three year term.
I assume she has a staff, and I suspect she has a million willing experts just a telephone call away too.
bluestarone
(16,959 posts)Brother Buzz
(36,440 posts)I'm surprised the orange anus hasn't attacked her yet
LetMyPeopleVote
(145,291 posts)I was amused to see that DWAC/Trump Media is classified as a meme stock where the value is due to personality and not due to the real value of issuer of the meme stock. This article is a good discussion of the meme nature of DWAC/TMT.
https://www.vanityfair.com/news/donald-trump-truth-social-media-merger
Truth Social is a bad imitation of Twitter, where Trump was an unavoidable presence long before he ran for president. Its chock full of stale red-pilled memes, MAGA conspiracy theories, and of course, Trump. Thats the main draw. Truth Social is the only place the former president now regularly posts his unfettered thoughts......
DWAC is best thought of as a meme stock. You may remember the meme stock fad from when retail investors on Reddit successfully coordinated a short squeeze with GameStop stock, before glomming onto a series of other millennial nostalgia brands like AMC Entertainment, BlackBerry, and Bed Bath & Beyond. Meme stocks are often publicly traded companies that attract an inordinate percentage of individual investors and their stock performance fluctuates in a way thats significantly divorced from the reality of their underlying business. Combine those two trends and youll start to see why Trumps media company could be valued at roughly $9 billion if it merges with DWAC.
Jay Ritter, a finance professor at the University of Florida, says meme stocks often depend on the greater fool theory of investing, meaning rational investors might buy in expecting the stock price to rise and betting that they can sell their shares to a greater fool willing to buy them at a higher price. In this case, however, Ritter speculates there is an inordinate number of individual retail investors compared to institutional investors, such as hedge funds, that normally own SPAC shares prior to a merger. Here youve got ideology involved [too]as far as I can tell, the vast majority of DWAC investors are Trump political investors, and theyre to some degree putting their money where their mouth is My suspicion is most of them have bought the stock as a show of political support. In this way, Trump is conducting yet another public fundraising from his supportersthis time through the public markets.
TFG is locked up and cannot sell or pledge this stock for six months following the merger. Even if TFG was able to pledge the stock the stock is so volatile that a bank would be crazy to take this stock as collateral.
Trump might be able to borrow money with his stock as collateral as a way to gain access to money more quickly, but he would have to either get an exemption from the post-merger company or just move ahead without one and hope that the board lets it slide, Ohlrogge said, since the terms of the agreement with DWAC dont allow it. If there were a bank that did take such a deal [allowing Trump to use his stock as collateral], it would raise serious concerns that the bank is doing it for reasons other than a belief it is a profitable lending opportunity, he said. Namely, it would raise concerns that the bank is doing it in order to win influence with someone who might become US president. If that bank were affiliated directly or indirectly with a foreign government, it would be even more concerning still.
Any bank that made such risky loan would be subject to attack. Lawrence O'Donnell commented on Chubb's bond (which appears to be secured by cash) and after such criticism, Chubb backed out
Link to tweet
Link to tweet
This will be fun to watch
BumRushDaShow
(129,059 posts)and how they backed away from the "big one" (which I figured would happen). The first was a gratis but the 2nd wasn't gonna happen!
LetMyPeopleVote
(145,291 posts)I deal in the real world with real companies who go public with real registration statements and underwriters. I was always amused by SPAC deals and I was not surprised to see that many of these deals went bust because there was no value to the stock. The son of a client looked at the Gamestop silliness and hopefully got out before that stock fell.
Bloomberg has an amusing article on DWAC including the fact that DWAC has had trouble turning out the vote for stockholder meetings due to the fact that there are no or few institutional stockholders who can be counted to show up at the stockholder meeting. I remember DWAC had to reschedule and extend a number of stockholder voters due to a lack of quorum in the votes to keep the company alive during SEC review. The article discusses the possibility of TFG using his stock for a loan.
Link to tweet
https://www.bloomberg.com/opinion/articles/2024-03-19/banks-can-get-emissions-off-the-books
Then, the deal has to close right after the vote. At that point, Trump will personally have shares worth about $2.8 billion. [9]
Also, Trumps shares are subject to a lockup agreement, so hes not allowed to lend, offer, pledge, hypothecate, encumber, donate, assign, sell, contract to sell or otherwise transfer or dispose of his shares for six months, which presumably covers using them as collateral for a loan (or appeals bond). But the agreement is between Trump and DWAC, and DWAC could just waive it. It is not best practices or anything, as a capital markets matter, to waive the lockup an hour after the merger, but I think it is possible. Ordinarily you dont do it because shareholders will be mad about additional shares flooding the market, but (1) if he just pledges his shares to a bank, they wont flood the market, and (2) the shareholders are presumably Trump fans and will be happy to help him fund his legal bills. Probably the stock would go up if they gave him a limited waiver for this.
The other problem is, if you were a bank, would you lend money against those shares? Maybe? Bloombergs Bailey Lipschultz reported last month:
He needs the money but he cant sell too much at once without risking tanking the stock, said Usha Rodrigues, a professor at the University of Georgia School of Law. Once the lockup is expired, he could use the shares as collateral for loans in order to access cash without selling the shares.
And its unlikely a bank would lend him a large sum of money against the locked-up shares, according to industry watchers like University of Florida finance professor Jay Ritter.
I guess Im a little more optimistic than that, though I see his point. The shares are worth billions of dollars at present market value, but TMTG has never actually made money, [10] and a bank that lends money against a locked-up meme stock is making a risky bet that the shares will still be valuable in six months. A lot can happen in six months! Still, at current prices, thats a lot of collateral. Its not an insane bet. Youd want recourse.
I will be surprised to see a bank making a loan on this stock. If AG James forecloses on this stock, then TFG will no longer be a stockholder and there will be no value to this stock.
This will be fun to watch.
Bayard
(22,075 posts)But I suspect Putin is done with trump as a losing proposition these days. More likely its the Saudis.
LetMyPeopleVote
(145,291 posts)Pluvious
(4,311 posts)I'm curious what someone in the industry thinks
LetMyPeopleVote
(145,291 posts)You only invest in one of these companies if think that there is a greater fool out there to buy you out. The trouble is if you are the last one to buy at the high price. A number of SPAC companies have failed because these companies were not strong businesses who should be public companies
Pluvious
(4,311 posts)( I was asking about your opinion on the movie about the GameStonk story )