The board has finally approved Donald Trump’s troubled SPAC deal, allowing him to settle nearly half a billion dollars in legal actions. However, the board’s consent is required for him to proceed with the sale.
Let’s clarify all the acronyms right away. Digital World Acquisition Corporation (DWAC), a special purpose acquisition company (SPAC), has been involved in lengthy negotiations to merge with Trump Media and Technology Group (TMTG) and subsequently list on the NASDAQ as $DJT. However, it has faced challenges due to shareholder hesitancy, close examination by the Securities and Exchange Commission (SEC), and even legal subpoenas from grand juries.
And that’s not even considering the dubious achievements of Truth Social, the biased social network hastily created following the removal of the former president from Twitter. TMTG had a net loss of approximately $49 million in 2023, with revenues of less than $4 million. These numbers are far from impressive.
Multiple issues led to the repeated delays of the DWAC-TMTG merger, giving the impression that shareholders might eventually give up if the timeline exceeded the limits set in the SPAC terms.
However, the companies have now submitted the required paperwork to the SEC in order to finalize the merger. Given the significant increase in DWAC stock, which is currently trading at over $42 per share, and considering that Trump is the largest shareholder with a whopping 79 million shares, it is possible that he may soon possess a staggering $3 billion in equity in the new company.
The timing couldn’t have been better for Trump personally. He needs to post a substantial amount in bonds within a short timeframe, or else risk losing his assets due to a significant fraud case in New York. Additionally, there are other financial obligations, loans, and ongoing legal matters that could further contribute to his debt. If he manages to sell it, a $3 billion windfall would certainly be a welcome addition.
A “lock-up” condition in the merger agreement, which requires the board’s approval for any stock sale by the company’s officers and major investors for the next six months, presents a minor issue.
It is evident that numerous shareholders in the recently listed TMTG will be eager to sell their shares promptly. If Trump wanted to finance his current liabilities, he would need to sell approximately 12 million shares, which would account for about 15% of his total stake. Would the board give their approval?
It’s a precarious situation they’ll be facing, with the possibility of a sudden sell-off by Trump causing prices to plummet and prompting others to quickly sell their shares before they lose value. However, without financial assistance, Trump could potentially face bankruptcy, thereby posing a different threat to the enterprise.
Trump could use his shares as collateral for a loan, agreeing to sell them in 6 months instead of immediately. However, it’s not an easy prediction to make, as it relies on someone’s willingness to speculate on the future value of those shares in six months. If the company’s stock were to decrease to, for example, $8—a decline in value that is not unusual for SPACs—Trump’s entire investment might not be sufficient to cover his debts in New York.
We are uncertain about the precise timing of $DJT’s commencement of trading, but if all the necessary paperwork is completed, it should occur in the near future. We will closely monitor this unique and significant transaction.
