Shareholders voted Friday to take former president Donald Trump’s media company public, a long-delayed move that will open the owner of Truth Social to stock-market investors and grant Trump a stake worth billions of dollars that he could use to pay down his legal debts.
Friday’s vote by investors in Digital World Acquisition authorized the special purpose acquisition company, or SPAC, to merge with Trump Media & Technology Group as part of a process that will avoid a more traditional public offering.
Trump will own about 60 percent of the company, which at Digital World’s current share price would be worth about $2.9 billion. But trading on the stock market also will open the company to more public scrutiny, and any drops in share prices will affect the value of his stake.
Digital World’s stock price plunged more than 13 percent Friday, to just under $37. Because Trump will own roughly 78 million shares in the post-merger company, the fall in price cut Trump’s paper take from the deal by around $457 million.
Trump’s allies and company executives will be granted bundles of shares in the new company that could be worth millions of dollars. Trump and other investors could earn tens of millions more shares through an “earnout” provision tied to the stock’s performance, Digital World said in a Securities and Exchange Commission filing.
Some critics have said Trump Media is a “meme stock” with a more than $5 billion valuation they say is out of sync with its financial outlook. Trump Media lost $49 million in the first nine months of last year and brought in $3.4 million in revenue, Digital World said in an SEC filing.
Digital World raised $300 million from investors that will carry over to Trump Media. But some of that money will go toward the SPAC’s more than $60 million in liabilities as well an $18 million settlement with the SEC, which Digital World agreed to last year after regulators charged it with misleading investors about its merger plans.
A lockup provision in the merger agreement will prevent Trump and other major investors from selling their shares for six months unless he is granted a waiver by the post-merger company’s board.
The provision could limit Trump’s ability to use the windfall to help pay off the hundreds of millions of dollars he owes in legal judgments. Trump does not have the cash to secure a bond that would delay enforcement of the $464 million judgment in a New York fraud case, his lawyers said. If he does not post a bond by Monday, the state’s attorney general could move to seize his bank accounts, real estate and other assets.
Any lockup change or waiver will be decided by the post-merger company’s board, which will be stocked with Trump allies, an SEC filing shows. The board’s nominees include Trump’s oldest son, Donald Trump Jr.; Trump’s former trade representative, Robert E. Lighthizer; Linda McMahon, who headed the Small Business Administration under Trump; and Kash Patel, who served on Trump’s National Security Council.
But lockups are standard provisions in corporate deals and very rarely overturned, according to three SPAC experts who spoke with The Washington Post. Big investors and investment bankers, they said, often insist on the provisions because they give investors confidence that major shareholders won’t look for an early exit and possibly drive down the price.
If Trump or other shareholders were given a lockup waiver, other investors might be concerned that they could “flood the market because they have so many shares” or look to be “cashing out to leave the company because they don’t think well of its prospects,” said Usha Rodrigues, a University of Georgia law professor who studies SPACs.
If the share price plunged after Trump received a lockup waiver, the move could also open the company to shareholder lawsuits arguing it had unfairly damaged their financial stake, said Michael Ohlrogge, a New York University associate law professor.
“Because of this big liability risk, I have a hard time imagining a company granting a lockup waiver,” Ohlrogge said. “It could easily have an extremely large, negative impact on the share price. At the same time, even if doing this made the price fall by 90 percent, the whole deal would still end up being extremely lucrative for” Trump.
The post-merger company will retain the Trump Media name and be led by Devin Nunes, the former Republican representative from California. The company could begin trading on the Nasdaq stock exchange as soon as Monday under the ticker symbol of Trump’s initials, DJT. That symbol was also used for Trump’s only other public company, Trump Hotels and Casino Resorts, which collapsed into a penny stock in less than a decade and filed for bankruptcy in 2004.
Truth Social has become Trump’s main online megaphone and a gathering place for Trump supporters. Though it launched as an alternative to Twitter, the platform retains a small fraction of its online audience. Trump’s Truth Social account has 6.7 million followers, compared to the 88 million he had on Twitter in 2021.
Trump said in a Truth Social post on Thursday before the vote, “TRUTH SOCIAL IS MY VOICE, AND THE REAL VOICE OF AMERICA!!! MAGA2024!!!”
Two former contestants from his reality show “The Apprentice” proposed the idea of a “free speech” media and internet business to Trump after he was kicked from Twitter and other social networks following the U.S. Capitol riots on Jan. 6, 2021.
The company’s merger proposal with Digital World has faced years of hurdles and delays since then due to investigations by the SEC and the Justice Department, which has probed insider-trading and money-laundering allegations involving Digital World investors.
Last summer, when the deal’s certainty was in doubt, Trump asked billionaire Elon Musk whether he wanted to buy Truth Social, two people with knowledge of the conversation told The Post. The proposal went nowhere, though the two men have communicated since.
More recently, the deal has been embroiled in a legal battle royale, with four lawsuits in three states involving Trump Media, Digital World, co-founders Andy Litinsky and Wes Moss, and Digital World’s former chief executive, Patrick Orlando.
Orlando — who was fired as chief last year but remains in control of Digital World’s biggest founding investor, Arc Global Investments II — had refused to vote in support of the merger before Friday’s vote, potentially imperiling the deal, attorneys for Trump Media and Digital World said in a lawsuit this week seeking to force his vote. Orlando spoke only briefly on the shareholder call Friday and did not offer further comment on how he voted.
Digital World’s more than 400,000 retail investors included supporters of Trump and speculators hoping to cash in on the deal’s attention. One investor, dressed in a pirate costume and calling himself “Captain DWAC,” live-streamed the shareholder vote on the video site Rumble and played sounds of applause when the successful vote was announced.
“Lots of hugs,” said the investor, Chad Nedohin, a worship leader in Canada. “This has been a long, long fight.”