New York – The anticipated Wall Street debut of Donald Trump’s Truth Social network has created a buzz, with the potential to grant the former president stock valued at billions on paper. However, despite the hype surrounding the launch, uncertainties linger about the long-term sustainability of the business. Trump’s company has acknowledged the likelihood of continued financial losses, casting doubt on the true value of the stock.
The pivotal moment hinges on a crucial vote scheduled for Friday by shareholders of Digital World Acquisition Corp., a company currently sitting on a significant cash reserve. If approved, the merger with Trump Media & Technology Group (TMTG), the entity behind Truth Social, could facilitate the transition of TMTG’s stock to the Nasdaq under Digital World’s name.
Digital World, classified as a special purpose acquisition company or SPAC, raises capital with the aim of merging with other businesses. Such arrangements offer expedited paths for companies like TMTG to list their stocks on major exchanges like the NYSE or Nasdaq, bypassing cumbersome IPO processes.
The vote on Friday by Digital World shareholders will determine the fate of the proposed merger with TMTG, spearheaded by Trump serving as chairman of the latter. The enthusiasm surrounding the potential partnership has driven Digital World’s stock price to soaring heights, exceeding $40 per share on Thursday and delivering substantial gains this year.
If the merger is greenlit, Trump’s ownership stake in the combined company would give him control of nearly 58% of the entity, equating to over $3 billion in value based on Digital World’s current stock price. However, legal restrictions prevent immediate selling of the stock, as major shareholders are bound by a lock-up provision for at least six months post-closure of the deal.
Digital World has outlined numerous risks associated with the merger, emphasizing TMTG’s ongoing financial losses and the unpredictable performance of new social media platforms. Industry experts caution against overvaluing the company, citing discrepancies between stock price and fundamental value. The composition of the company’s board, expected to include key figures like Donald Trump Jr. and former Rep. Devin Nunes, underlines the close ties to the Trump family and administration.
As the fate of Truth Social hangs in the balance, investors remain cautious amid uncertainties surrounding the viability of the venture. The impending stock market debut could either mark a new chapter in Trump’s business endeavors or highlight the challenges of launching a social media platform amidst intense scrutiny and skepticism.